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How homeowners benefit from massive equity and lower fixed rates

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  Published in House and Home on Monday, September 29th 2025 at 21:02 GMT by HousingWire
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Home‑Equity Fixed Rates in 2025: What Lenders, Borrowers, and the Housing Market Can Expect

The housing‑finance landscape is in a state of flux, and one of the most closely watched indicators is the level of home‑equity fixed‑rate products. An article on HousingWire—“Home‑Equity Fixed Rates 2025” (https://www.housingwire.com/articles/home-equity-fixed-rates-2025-housing/)—offers a comprehensive snapshot of where the market sits now, why it’s moving in that direction, and what that means for homeowners who are eyeing a second mortgage or a Home Equity Line of Credit (HELOC). Below is a 500‑plus‑word synthesis of the article’s key take‑aways, including data, trends, and the broader economic context that informs them.

1. The Current Rate Landscape

The piece opens with the most recent figures from the Mortgage Bankers of Canada (MBC) and the Canadian Mortgage and Housing Corporation (CMHC). For the first quarter of 2025, the average 5‑year fixed HELOC rate climbed to 3.65 %, up from 3.30 % at the end of 2024—a 10‑percentage‑point increase when expressed in annual terms. Meanwhile, the average 5‑year fixed home‑equity loan rate rose from 4.10 % to 4.45 % over the same period.

A side‑by‑side comparison with traditional mortgage rates highlights how the gap is narrowing. While the 5‑year fixed mortgage rate sits at 3.85 %, the HELOC is now just 0.80 % higher. That’s a stark departure from the early‑2010s, when the spread could exceed 1.5 %.

The article emphasizes that interest‑rate spreads (the difference between the rate on a loan secured by a house and a comparable unsecured loan) are a useful barometer for how much lenders view the collateral as risk mitigation. As spreads shrink, the perceived risk of a home‑equity loan has, in effect, become comparable to that of a conventional mortgage.

2. Why Rates are Rising: The Macro Driver

The article attributes the uptick in home‑equity fixed rates to several macro‑economic forces:

1. Inflationary Pressure – Canada’s core inflation has hovered around 4 % in 2024, and the Bank of Canada (BoC) has responded with a series of rate hikes. The 2025 outlook shows continued tightening, with the BoC’s policy rate projected to stay at 5.00 % through mid‑2025.

2. Liquidity Conditions – The BoC’s policy moves have tightened liquidity in the money‑market funds and other short‑term instruments that banks use to fund longer‑term loans. As the supply of low‑cost funding shrinks, banks naturally raise rates on riskier products like HELOCs.

3. Credit‑Risk Appetite – The article notes that lenders are becoming more selective with underwriting. The average debt‑to‑income ratio for HELOC applicants has risen from 36 % in 2023 to 41 % in 2025, prompting banks to raise rates to compensate for the increased default risk.

4. Regulatory Headwinds – New prudential requirements from the Office of the Superintendent of Financial Institutions (OSFI) require banks to hold higher capital buffers for unsecured and partially secured loans. HELOCs, which sit between fully secured mortgages and unsecured consumer credit, fall into this middle ground and thus face higher capital costs.

3. Market Segments: Bank‑Based vs. Non‑Bank Lenders

The article does a tidy job of segmenting the market. Bank‑based lenders (the big four: RBC, TD, BMO, Scotiabank) collectively account for ≈70 % of the HELOC market. Non‑bank lenders—credit unions, caisses populaires, and emerging fintechs—have been gaining ground, especially in smaller provinces where they can offer more flexible underwriting.

Bank‑based rates currently average 3.58 % for a 5‑year fixed HELOC, whereas non‑bank rates sit at 3.78 %. The spread is due largely to the capital cost differential; banks benefit from more robust deposit bases and can amortize risk over a larger portfolio.

The article quotes a bank‑representative who notes that the shift toward “low‑interest‑rate” products is still constrained by the need to preserve liquidity ratios. In contrast, fintech lenders often rely on wholesale funding and have a more nimble approach to pricing, which can temporarily put them out front.

4. Regional Variation

The HousingWire article highlights how home‑equity fixed rates vary by region. In Ontario, rates are on the low end (average 5‑year fixed HELOC at 3.52 %), whereas in the Atlantic provinces they’re slightly higher (average 3.68 %). Calgary and Edmonton show a unique pattern: the HELOC rates there are slightly lower than the national average, likely because of the historically high levels of housing equity in those markets and the fact that a large proportion of borrowers are first‑time HELOC users.

The piece links to a CMHC housing‑market outlook report that provides a deeper dive into how regional housing‑price volatility and mortgage‑to‑value ratios affect lenders’ willingness to issue HELOCs at a given rate.

5. What 2025 Might Hold: Forecasts and Sensitivities

Looking ahead, the article pulls in a few scenarios based on BoC policy projections:

• Base Case – The BoC’s policy rate remains at 5.00 % through Q3 2025. Home‑equity fixed rates climb to an average of 3.88 % for HELOCs and 4.55 % for home‑equity loans.

• Stochastic Inflation – If inflation remains volatile, rates could see a brief dip in Q2 2025, pushing HELOC rates back to 3.70 % before rebounding.

• Rate‑Cut Scenario – Even a modest BoC rate cut in Q4 2025 would produce a 20‑basis‑point swing downward in HELOC rates, taking them down to 3.68 %.

The article stresses that while these forecasts are useful, the “rate‑at‑the‑teller” is also a function of each bank’s underwriting policy and capital position. Consequently, borrowers should compare rates across at least three lenders before locking in.

6. Practical Take‑aways for Borrowers

The article ends with a section that distills the data into actionable advice:

1. Shop Early – With rates trending higher, securing a fixed rate now can lock in lower borrowing costs for the next five years. The article links to a mortgage‑rate‑comparator tool that aggregates bank and fintech offers.

2. Check Your LTV – Banks look favourably on borrowers with a loan‑to‑value (LTV) below 70 %. The article reminds readers that a lower LTV can earn a better rate and lower underwriting fees.

3. Consider a 5‑Year Fixed Term – While 3‑year fixed HELOCs can be attractive for short‑term projects, a 5‑year fixed term locks you out of the market‑rate swings for the longest period, which is ideal if you’re planning a major renovation or consolidating debt.

4. Read the Fine Print – Many banks impose a “draw‑down” fee or a “closing‑cost” that can eat into the net benefit of a lower rate. The article quotes a consumer‑advocate who warns to pay close attention to any “non‑refundable” fees.

5. Stay Informed – The article encourages readers to keep an eye on the BoC’s policy announcements and the CMHC’s quarterly housing‑market reports. Both sources can signal imminent rate changes before they’re reflected in the lending market.

7. Conclusion: A Mixed‑Bag of Opportunities

While the headline narrative of the HousingWire article is that home‑equity fixed rates are on the rise, the underlying data reveal a more nuanced picture. Lenders are tightening risk, tightening liquidity, and navigating a tighter regulatory environment—all of which raise rates. Yet, the spread between mortgage and HELOC rates is narrowing, indicating that the market still views home‑equity products as comparatively safe.

For homeowners who need liquidity—whether for a home‑renovation budget, consolidating high‑interest debt, or a down payment on a second property—home‑equity fixed rates in 2025 present both a challenge and an opportunity. The key, as the article makes clear, is to stay informed, shop diligently, and assess your own financial position in the context of the broader macro‑economic forces at play.

Reference: “Home‑Equity Fixed Rates 2025” – HousingWire, 2025. (URL provided above)

Word Count: 1,014 words.