Lower Rates Could Move More of the “Missing Middle” Off the Sidelines
BY NKBA Editorial Team
A persistent obstacle to kitchen & bath industry growth has been this conundrum: U.S homeowners enjoy historic levels of home equity, but high borrowing rates make many reluctant to tap into that equity to fund renovation projects.
According to the NKBA’s 2026 Kitchen & Bath Industry Outlook, lower home equity line of credit (HELOC) borrowing rates this year – along with more modest tariff-related impacts on product pricing – should encourage borrowing for K&B projects by middle-income consumers, in particular.
Here are some additional insights from the report:
Home Equity Funds Major Remodels
Americans hold over $35 trillion in home equity, up 84% from the end of 2019, averaging about $414,000 per homeowner. While most (71%) of homeowner kitchen and bath renovation projects are financed using cash or savings, the next leading source of financing is home equity (10%).
Kitchen and bath renovations benefit heavily from home equity financing. Kitchen and bath additions, and full kitchen remodels, are more frequently financed by home equity withdrawals than other remodeling categories.
Improving Borrowing Conditions
Home equity financing has been rising slowly in response to lower interest rates. Monthly borrowing costs are now at 2022 levels. Conditions are expected to improve further this year, as lower borrowing rates reduce the cost of accessing home equity for renovations. The HELOC rate in February 2026, which averages approximately 8.1%, is expected to end the year closer to 7%.
Leveraging Higher-Valued Homes
Home equity financing is expected to be concentrated in higher-valued homes this year. More than two-thirds of tappable home equity is held in higher-value homes, worth $400K and above. About one-third of available equity is in homes valued between $400 and $799K, while slightly more (39%) is in homes valued at $800K and above.
In Mid-value Homes, A Concentration on Kitchens
Kitchen home equity spending is heavily concentrated in mid-value homes – the so-called “missing middle.” Nearly a quarter (24%) of kitchen remodels in mid-value homes are home equity-financed, as opposed to 12% of bathrooms.
Home equity supports remodeling later in life
In 2026, most household growth will come from older age groups. Older households tend to
have more tappable home equity to fund kitchen and bath projects.Typically, kitchen and bath spending increases around age 40, driven by life events and wealth gains. It rises again among homeowners ages 55–59 as they prepare to age in place.
Locked-in mortgages encourage remodeling
Many homeowners have mortgages that are well below today’s rates. This mortgage rate “lock-in” makes them reluctant to move and provides a strong incentive to remodel. It’s more economical for consumers to access home equity lines of credit and use the funds to improve or expand their homes through kitchen and bathroom renovations.
“We’re hopeful that easing borrowing rates will begin to have a real impact on moving kitchen and bath projects forward in large numbers,” said Bill Darcy, Global President & CEO of NKBA I KBIS. “We know there are a lot of homeowners who are eager to tap into their home equity under the right conditions to finally make the updated kitchens and baths they’ve wanted for years a reality.”
For more insights, download the full NKBA 2026 Kitchen & Bath Industry Outlook.
