‘You’re trading one kind of stress for another.': Dave Ramsey says this 'stupid' housing trend is getting out of control and could leave you without a home — are you doing it, too?

Sure enough, recent data supports Ramsey’s objections: the average interest rate on a HELOC is 9.02% while an average 30-year fixed mortgage is less than 8%, according to the Federal Reserve.

Why are HELOCs so popular?

A report by the Urban Institute suggests that HELOC lenders could still be benefiting from the recently lapsed cheap-credit era. Homeowners who in previous years locked into ultra-low long-term mortgage rates don’t want to give those rates up by selling their homes.

So those who want to access their accumulated equity may be more likely to seek other methods — namely, temporary lines of credit at higher rates — so as to protect their cheap primary mortgage.

Ramsey doesn’t buy that thinking. In fact, he’s not a fan of any housing debt. He advises people to limit their lifestyle upgrades and pay in cash for property when possible.

“Ultimately we want to be 100% debt-free,” he said during the episode. “Instead of figuring out a time when debt is OK, let’s figure out a way to avoid it.”

Indeed, about 23% of homeowners in the U.S. own their property free and clear without any mortgage. These lucky households are insulated from the credit cycle. Higher mortgage rates don’t impact them. They also have the flexibility to sell their home and buy another for cash, which is what Ramsey suggests most people aspire to.