Last Thursday, my client Dorothy called me practically hyperventilating. “The lender just told me HECM rates went up again,” she said. “Should I lock in now or wait? I don’t understand how these rates even work!”
I get it, Dorothy. HECM interest rates are confusing as heck, and with everything that’s happened in the economy lately, they’ve been bouncing around like a pinball.
After helping families navigate reverse mortgages for over a decade, I’ve learned that understanding HECM rates isn’t just about knowing today’s numbers—it’s about understanding how they work, what drives them, and most importantly, how they’ll affect your financial picture for years to come.
So let’s dive into HECM interest rates like real people, not financial textbooks.
Current HECM Interest Rates (June 2025)
As of mid-June 2025, here’s what we’re seeing in the HECM market:
Fixed Rate HECMs: 7.25% – 7.75% Adjustable Rate HECMs (initial rates): 6.50% – 7.00% Expected Rate (for calculating loan amounts): 7.50% – 8.00%
These rates have climbed significantly from where they were just two years ago. In early 2023, we were seeing fixed rates around 5.5%. The Federal Reserve’s ongoing battle with inflation has pushed rates higher across all mortgage products, and HECMs haven’t been immune.
But here’s what’s frustrating—these numbers change constantly. By the time you read this, they could be different. That’s why understanding how HECM rates work is more important than memorizing today’s numbers.
Fixed vs. Adjustable: The Big Decision
This is where most people get stuck, and honestly, there’s no universally right answer.
Fixed Rate HECMs
With a fixed rate, your interest rate never changes. Ever. Whether rates go to 3% or 15%, you’re locked in at whatever rate you started with.
The good stuff:
- Complete predictability
- No surprises about how fast your loan balance grows
- Sleep-better-at-night peace of mind
The not-so-good stuff:
- Fixed rates start higher than adjustable rates
- You’re stuck if rates drop significantly later
- Limited to lump sum payouts only (no credit lines or monthly payments)
My client Robert chose a fixed rate at 7.5% last month. “I’m 78 years old,” he told me. “I don’t want to spend my remaining years worrying about interest rates going up.”
Adjustable Rate HECMs
Adjustable rates start lower but can change over time based on market conditions. They’re tied to specific financial indexes plus a margin.
The advantages:
- Lower starting rates
- Flexible payout options (lump sum, credit line, monthly payments, or combinations)
- Potential to benefit if rates drop
- Rate caps limit how much they can increase
The downsides:
- Uncertainty about future rates
- Your loan balance could grow faster if rates rise
- More complex to understand and track
Most of my clients choose adjustable rates because of the flexibility in payout options. You literally can’t get a credit line or monthly payments with a fixed rate HECM.
How HECM Rates Are Determined
For Fixed Rate HECMs
Fixed rates are based on the 10-year Treasury rate plus a margin (typically 2-4 percentage points). When Treasury rates go up, HECM fixed rates follow.
The margin varies by lender and can depend on factors like:
- Your age and property value
- Market conditions
- The lender’s business model
- Competition among lenders
For Adjustable Rate HECMs
Adjustable rates use the 1-year Treasury rate as the index, plus a margin (usually 2-3 percentage points). The rate adjusts annually based on where the Treasury rate is at that time.
Here’s what protects you from rate shock:
- Annual cap: Limits how much the rate can increase in any single year (typically 2%)
- Lifetime cap: Limits total increase over the life of the loan (typically 5% above your starting rate)
So if you start at 6.5%, your rate could theoretically max out at 11.5%, but it could only increase by 2% per year to get there.
The “Expected Rate” Confusion
This trips up almost everyone, so let me explain it clearly.
When calculating how much you can borrow, lenders don’t use your actual interest rate. They use something called the “expected rate,” which is always higher than your starting rate.
Why? Because they assume adjustable rates will increase over time. The expected rate is your starting rate plus a margin (currently about 2-2.5%).
Real example:
- Your actual adjustable rate: 6.75%
- Expected rate used for calculations: 9.25%
- Your loan amount is based on the 9.25% rate
This means you might qualify for less money than you expected, even though you’re only paying 6.75% initially.
It’s confusing and frankly annoying, but it’s designed to protect both you and the lender from future rate increases.
What’s Driving HECM Rates Right Now
Federal Reserve Policy
The Fed has been hiking rates to combat inflation, and that directly impacts HECM rates. Every Fed rate increase typically adds 0.25% to 0.50% to HECM rates.
As of June 2025, most economists expect the Fed to hold rates steady for the rest of the year, but nobody knows for sure.
Treasury Market Conditions
HECM rates are closely tied to Treasury rates. When investors demand higher yields on government bonds, HECM rates follow.
Current Treasury market stress—driven by federal deficit concerns and global economic uncertainty—has pushed these rates higher than normal historical relationships would suggest.
Lender Risk Assessment
Some lenders have become more conservative about HECM lending, adding extra margin to their rates to compensate for perceived risks in the reverse mortgage market.
Economic Uncertainty
When economic conditions are uncertain, lenders typically charge higher rates to compensate for unknown risks. The current environment definitely qualifies as uncertain.
How Interest Rates Affect Your Loan
Impact on Borrowing Capacity
Higher interest rates mean you can borrow less money against your home’s value. This happens because lenders assume your loan balance will grow faster at higher rates.
Example with current rates:
- Home value: $400,000
- Age: 70
- At 6% expected rate: Might qualify for $220,000
- At 8% expected rate: Might qualify for $180,000
That’s a $40,000 difference based purely on interest rate assumptions.
Impact on Loan Balance Growth
Your loan balance grows every month as interest compounds. Higher rates mean faster growth.
Real numbers: If you borrow $200,000:
- At 6.5% interest: Balance reaches $400,000 in about 11 years
- At 7.5% interest: Balance reaches $400,000 in about 9.5 years
That year and a half difference could be significant for inheritance planning.
Rate Lock Strategies
Most HECM lenders will lock your interest rate for 30-60 days while processing your application. Here’s how to use this strategically:
When to Lock
Lock immediately if:
- You’re ready to proceed and have chosen your lender
- Rates seem to be trending upward
- You’re comfortable with current rate levels
Consider waiting if:
- You’re still shopping between lenders
- Rates seem to be dropping
- You need more time to complete required counseling
Rate Lock Periods
- Most lenders: 30-45 days
- Some offer: 60-90 days (sometimes for a fee)
- Extensions: Usually available but may come with costs
My client Susan got burned by not locking when she should have. She delayed her rate lock for two weeks waiting for “better rates,” and during that time, rates increased by 0.5%. On her $250,000 loan amount, that delay cost her about $1,250 annually in extra interest.
HECM Rate Comparison Shopping
What to Compare
Don’t just look at the interest rate. Compare:
- Interest rate
- Origination fees
- Other closing costs
- Rate lock period
- Lender reputation and service
Getting Accurate Quotes
Ask each lender for:
- Today’s rates for both fixed and adjustable options
- Expected rate used for loan calculations
- Complete fee breakdown
- APR (which includes costs beyond just interest)
Timing Your Shopping
Rate shopping works best when done efficiently. Get all your quotes within a 1-2 week period so you’re comparing similar market conditions.
Recent Rate Trends and Predictions
Where We’ve Been
- 2021-2022: Historic lows around 3-4%
- 2023: Rapid increases to 5-6%
- 2024: Continued climbing to 6-7%
- 2025: Currently 7-8% range
What Experts Are Saying
Most economists expect HECM rates to:
- Remain elevated through 2025
- Potentially decline slightly in 2026 if inflation moderates
- Stay above historical lows for the foreseeable future
But remember—experts have been wrong before. A lot.
Factors That Could Change Everything
- Federal Reserve policy shifts
- Major economic events (recession, financial crisis)
- Changes in federal HECM program rules
- Global economic developments
Strategies for Different Rate Environments
Rising Rate Environment (Like Now)
- Consider locking rates sooner rather than later
- Evaluate whether waiting makes sense for your situation
- Focus on lenders offering longer rate lock periods
- Consider how rate increases affect your borrowing capacity
Stable Rate Environment
- Take time to shop thoroughly among multiple lenders
- Focus more on fees and service quality
- Less urgency about rate lock timing
Falling Rate Environment
- Consider delaying if you have flexibility
- Focus on lenders who offer easy refinancing options
- Be cautious about long rate lock periods
The Refinancing Option
If rates drop significantly after you get your HECM, you might be able to refinance to a lower rate. The HECM Streamline Refinance program allows this with reduced documentation.
When refinancing makes sense:
- Rates have dropped at least 2% from your current rate
- You’ve had your current HECM for at least 18 months
- The savings outweigh the new closing costs
When it doesn’t:
- Rate reduction is modest (less than 1-1.5%)
- You’re planning to move soon
- Your loan balance has grown significantly
Real-World Impact Stories
Case Study 1: The Rate Lock Winner
Martha, 72, was ready to proceed with her HECM in March 2025 when rates were 6.75%. Her loan officer suggested waiting because “rates might come down.” Martha decided to lock anyway.
Good call. By the time her loan closed in April, rates had increased to 7.25%. Her rate lock saved her about $1,000 annually in interest charges.
Case Study 2: The Timing Dilemma
Frank, 68, wanted to wait for lower rates throughout 2024. He kept postponing his application hoping for improvement. Finally applied in May 2025 at 7.5%—significantly higher than the 6.0% rates available when he first considered the option.
The lesson? Sometimes waiting for perfect timing costs more than just proceeding when rates are reasonable.
Case Study 3: Fixed vs. Adjustable Choice
Eleanor chose a fixed rate at 7.25% despite starting adjustable rates of 6.5%. “I want to know exactly what I’m dealing with,” she said.
Her friend Dorothy chose the adjustable rate for the flexibility of a credit line. Both made reasonable choices based on their priorities and risk tolerance.
Questions to Ask Your Lender
- What are your current rates for both fixed and adjustable HECMs?
- What expected rate will you use to calculate my loan amount?
- How long will you lock my interest rate?
- Can I extend the rate lock if needed? What does it cost?
- How do your rates compare to other lenders?
- What would my payment be if I chose monthly payments? (adjustable rate only)
- How often do adjustable rates typically change on your loans?
- What’s your process if I want to refinance later?
The Bottom Line on HECM Rates
Here’s what I tell all my clients: Interest rates matter, but they’re just one piece of the puzzle. The right rate from the wrong lender can be more expensive than a slightly higher rate from a lender who provides excellent service and fair fees.
Current HECM rates are higher than we’d all like, but they’re still reasonable by historical standards. If a reverse mortgage makes sense for your situation, don’t let rate timing paralyze your decision-making.
My client Dorothy, who I mentioned at the beginning? She decided to move forward despite rates being higher than she’d hoped. “I need this solution now,” she said. “I can’t put my life on hold waiting for perfect interest rates that might never come.”
Six months later, she’s glad she didn’t wait. Rates have only gone higher, and the peace of mind she’s gained from eliminating her mortgage payment has been worth every basis point of interest.
Remember—you’re not buying rates, you’re buying a financial solution. Make sure the solution fits your needs, and don’t get too hung up on rate timing you can’t control.