Home-equity borrowing is rising again, pushed by a combination of high interest rates on unsecured debt, homeowners’ reluctance to refinance low-rate first mortgages, and a large stock of accumulated housing wealth. The trend has also produced a recurring headline: home-equity loans are the fastest-growing category of consumer credit. That line can be true in specific lender segments, but it is often inaccurate as a matter of definition. The gap between the headline and the data says as much about how Americans are financing day-to-day pressures as it does about the credit cycle itself.

The Federal Reserve’s G.19 “consumer credit” series—commonly cited in discussions of household borrowing—excludes loans secured by real estate. Home-equity lines of credit (HELOCs) and closed-end home-equity loans are therefore not part of “consumer credit” as the Fed uses the term. What is rising is real-estate-secured borrowing that sits alongside the mortgage market and the broader household debt picture.

What “consumer credit” means—and what it doesn’t

Confusion begins with language. “Consumer credit” sounds like a catch-all phrase, but in the major U.S. statistical release most people cite, it is a narrower category.

This distinction matters because it changes what “fastest-growing” can mean. A category that is not included in the consumer credit series cannot be the fastest-growing category within that series.

The growth is real—just not always where the headline says it is

Across multiple sources, home-equity balances have been increasing.

The New York Fed reported that HELOC balances rose by $11 billion in Q3 2025, marking the 14th consecutive quarterly increase, bringing HELOCs to $422 billion outstanding. In the same period, credit card balances were $1.23 trillion, underscoring that households are leaning on multiple forms of borrowing at once.

Lender-level reporting tells a similar story. TruStage’s credit union trends data showed home-equity loan balances increased $2.1 billion in Q1 2025 and were up 19% from a year earlier, described as the fastest-growing loan category in that segment.

Industry research points to broadening activity. The Mortgage Bankers Association reported that combined HELOC and closed-end home-equity originations rose 7.2% in 2024, while total home-equity debt outstanding increased 10.3%.

The composition of demand has shifted in ways that suggest more than elective remodeling. In MBA reporting for 2024, 39% of borrowers cited debt consolidation as a reason for tapping home equity, while 46% cited home renovations, down meaningfully from earlier years.

Why homeowners are reaching for equity

Three forces explain most of the momentum.

First, rate lock-in. Many homeowners remain anchored to first-mortgage rates set during the low-rate years. A cash-out refinance would replace that rate with a higher one. Second-lien borrowing allows households to raise funds without rewriting the first mortgage.

Second, equity is abundant. ICE reported that mortgage holders entered late 2025 with $17.3 trillion in home equity, including $11.2 trillion considered “tappable” while maintaining a 20% equity cushion. ICE also estimated the average mortgage holder had about $204,000 available to borrow under that definition.

Third, the alternative is expensive. The Federal Reserve’s G.19 “terms of credit” data put the average credit card plan interest rate at 20.97% in November 2025. That level changes the calculus for households carrying revolving balances, particularly those using cards to bridge high-cost essentials.

The housing backdrop: slower price gains reduce the margin for error

Home prices are still rising in most national measures, but the pace has cooled. The FHFA reported home prices up 2.2% year over year in Q3 2025 and 0.2% quarter over quarter.

Slower appreciation does not by itself threaten household balance sheets. It does, however, limit the psychological comfort that comes from rapid price gains. Borrowing against equity is easier to justify when the collateral appears to be compounding quickly.

Products differ, but the common feature is collateral

Home-equity borrowing is often discussed as a single behavior. In practice, it is a set of instruments with different risks. The difference becomes more important when rates are elevated and household cash-flow margins are thin.

The third product category has been marketed aggressively in some channels. The CFPB has warned that “home equity contracts” are frequently presented as “no monthly payments,” “no interest,” or “not debt,” while still creating an obligation that can be expensive and difficult to compare to traditional credit. The agency noted that in the first 10 months of 2024, the four largest firms in this market securitized roughly $1.1 billion backed by about 11,000 contracts.

Debt consolidation is driving demand—and it changes the risk profile

The strongest signal in recent data is not merely that households are borrowing against equity, but what they are using it for. Consolidating high-rate revolving balances into a lower-rate secured product can improve monthly cash flow and reduce interest costs. It can also transfer risk from an unsecured lender to the borrower’s home.

A concise comparison helps clarify tradeoffs:

The operational risk is behavioral: consolidation can fail if households free up card capacity and then rebuild balances. That is less a product flaw than a cash-flow reality, and it has been common across cycles.

What to watch

• Rate sensitivity. HELOCs often carry variable rates, which can reprice faster than household incomes.
• Liquidity dependence. Using housing wealth as a substitute for savings exposes households to housing-market and employment shocks at the same time.
• Product complexity. Nontraditional “home equity contract” structures are difficult to compare on cost and may behave poorly in scenarios where the home must be sold quickly.
• Cooling price growth. Slower appreciation narrows the cushion that can make borrowing feel low-risk.

Conclusion

The rise in home-equity borrowing is not a puzzle. It is a rational response to the current spread between expensive unsecured credit and the perceived stability of housing wealth, amplified by the rate lock-in effect on first mortgages. The more consequential point is where the trend places risk: it shifts household strain from high-rate revolving debt toward obligations secured by the primary middle-class asset.

That shift can be prudent for some borrowers and destabilizing for others. At the aggregate level, it is a reminder that many households are financing affordability gaps with balance-sheet tools rather than income growth. As long as that remains true, the home will continue to function not only as shelter and savings, but as the country’s most important—and most unequal—source of liquidity.