Fed divided, rates steady: What it means for your pipeline.

The Housing Market Index (HMI) rose by one point, in November, to 38. This is well below the neutral level of 50, indicating builders still have a pessimistic outlook.

Price cuts on new construction homes rose and reached a five-year high of 41%. Economic uncertainty and affordability challenges continue to weigh on demand, causing builders to rely more on incentives. In total, the use of sales incentives was 65% in November.

The minutes from the October Federal Reserve meeting, released Wednesday, show a divided committee. Members of the committee disagreed not only on whether inflation or a weakening labor market represents a greater threat, but also when (and if) the committee should make the next cut.

The recent government shutdown adds to the uncertainty, as the Fed could be missing up to two months of key inflation and jobs data when they meet in December. As a result, expectations are for a pause, with rates likely held steady through the end of the year until policymakers have a clearer picture of the economy.

In the evolving landscape of U.S. housing finance, the next credit cycle may be written in second liens instead of the first. The Home Equity Line of Credit (HELOC), once a standard fixture of the pre-2008 market, has re-emerged in 2025 as a primary financial instrument for American homeowners. 

The catalyst for HELOC’s resurgence is a "perfect storm" of economic conditions. Following the Federal Reserve’s extended interest-rate cutting campaign, HELOC rates have fallen to their lowest levels since 2023. As reported by CBS News, this decline has made HELOCs a significantly more attractive option than personal loans or credit cards, which continue to carry double-digit interest rates. The "lock-in" effect is the primary driver. Millions of homeowners clinging to sub-4% mortgage rates are unwilling to sell, yet they sit on record levels of tappable equity.

The narrative around HELOCs has shifted from "lifestyle funding" to "financial stability." Roughly two-thirds of all homeowners in the country report at least $100,000 in home equity, and among those who’ve tapped it, 86% now see a HELOC as a core part of their financial safety net rather than just a renovation tool.

There is also a marked pivot to use HELOCs toward debt consolidation. Homeowners are leveraging their equity to pay off high-interest consumer debt, effectively swapping double digit credit card APRs for single-digit HELOC rates.

However, this resurgence is not without caution. HELOCs typically carry variable rates; borrowers remain exposed to payment shocks if economic tides turn. Furthermore, as 2026 approaches, industry data projects HELOC debt outstanding to grow by nearly 10% annually.

As we move through 2025 and into 2026, the HELOC is no longer just a renovation loan; it is a strategic liquidity tool for an equity-rich, mobility-constrained population. For lenders and borrowers alike, the key will be balancing this newfound liquidity with the discipline required to manage variable-rate debt in a complex economy.