Demand for home equity loans (HELs) and home equity lines of credit (HELOCs) exploded in the first quarter of 2026, reaching a high last seen in 2008. That's according to Intercontinental Exchange, Inc.'s June 2026 ICE Mortgage Monitor report, published on Tuesday.
Locked-In Homeowners
Unlike cash-out refinances, HELs and HELOCs allow homeowners to tap their home equity while retaining their first (main) mortgages — and their existing rates. And that's important for those lucky enough to have fixed-rate loans originated between 2020 and 2022, who currently pay uber-low rates.
The last thing they want is to sacrifice such rates in order to obtain a cash injection. So, it's no surprise that ICE reports some 3.9 million borrowers with mortgage rates fixed during those two years now have HELs or HELOCs.
This is a symptom of the locked-in homeowners phenomenon. The average weekly rate for a 30-year fixed-rate mortgage remained below 3% for two extended periods: from July 2020 to February 2021 and between April and October 2021, according to Freddie Mac's archives.
They hit an all-time low of 2.65% in January 2021. Naturally, there was a tidal wave of rate-and-term mortgage refinances to lower rates during 2020 and 2021, meaning many millions of homeowners currently enjoy those ultra-low interest costs.
Last week (June 4, 2026), that same average was 6.48%. Imagine having a sub-3% rate and facing a new rate of 6%+ today when moving home or carrying out a cash-out refinance, both of which require a whole new loan.
No wonder so many homeowners feel they're locked into their current mortgages.
"The housing market continues to be defined by the lock-in effect," said Andy Walden, head of mortgage and housing market research at ICE, in a statement.
"Millions of homeowners are sitting on first mortgages with rates well below current market levels, making second liens [HELs] and HELOCs an attractive way to access equity without giving up those loans," Walden continued. "While higher mortgage rates have reduced refinance opportunities and softened affordability gains in recent months, home prices continue to firm across much of the country, and affordability remains improved from year-ago levels."
Demand May Be Softening Now
Immediately before the conflict with Iran began, the average weekly rate for a 30-year fixed-rate mortgage dipped to 5.98%, says Freddie. That weekly average rate was reported on Feb. 26, and the Middle East blew up on Feb. 28.
Since then, those rates have tended to fall when markets have been optimistic about the chances of an early peace deal and an imminent opening of the Strait of Hormuz. But they've typically risen when hopes for those things have receded.
Applications for HELs and HELOCs are generally highly sensitive to interest rates. Why would homeowners apply for a loan when they believe there's a good chance they could get a lower rate if they wait a few weeks or months?
Would Homeowners Be Smart to Wait to Apply for a HEL or HELOC?
We expect that rates for mortgages, HELs and HELOCs will likely fall when the Strait of Hormuz reopens. But we suspect that they won't fall as far as many think, nor remain low for very long.
Of course, nobody knows for sure what will happen to those rates over the next few hours, let alone over the coming weeks, months, and years. And what happens will mostly depend on how quickly or slowly the inflation rate drops after the Iran conflict ends.
Higher for Longer
However, many agree with us that there's a real danger of rates remaining "higher for longer" than is widely anticipated. Most importantly, the Federal Reserve body that determines general interest rates (but only indirectly influences mortgage rates), has concerns.
"Almost all participants noted that there was a risk that the conflict in the Middle East could persist for an extended period or that, even after the conflict ended, the prices of oil and other commodities could remain elevated for longer than expected," said the minutes of the Fed's rate-setting committee's last meeting at the end of April.
"In such scenarios, these participants expected continued upward pressure on inflation arising from supply chain disruptions, high energy prices, or the pass-through of higher input costs to other prices. The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee’s 2 percent objective than they had previously expected. A majority of participants highlighted ... that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent."
When the Fed talks about "policy firming," it's generally referring to rate hikes. And many investors now expect Fed-affected rates to rise before the end of 2026, according to the CME FedWatch tool.
Meanwhile, some mortgage analysts are similarly pessimistic. "Mortgage rates are likely to stay elevated for longer as rising Treasury yields and persistent inflation keep pressure on borrowing costs," Sam Williamson, senior economist at First American, told National Mortgage Professional last month.
As far back as April, Politco was putting the chances of higher interest rates this year at 50%. And that was when it thought the consumer price index (CPI) might top 3.4% year over year (YOY) in 2026.
We're due May's CPI on Wednesday of this week. And markets are expecting it to come in at 4.2% YOY, according to MarketWatch.
To repeat ourselves, we don't know what will happen to rates for mortgages, HELs, and HELOCs. Nobody can.
But we do see good grounds for fearing they may rise, perhaps until this time next year or even later. And that means homeowners who want to tap their equity might wish to consider doing so sooner rather than later.
