Home Equity Lending News

HELOC Demand Retreats at Banks

A significant share of senior executives at banks are indicating that demand for home-secured credit lines retreated over the prior three months.

In response to a question about how their banks’ credit standards for home-equity line-of-credit approvals have changed over the past three months, 83 percent of the respondents said standards remained basically unchanged.

That was according to the Federal Reserve Board’s January 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices. Responses were given by executives from 69 domestic banks and 18 U.S. branches and agencies of foreign banks, though only 54 originate HELOCs. The survey was completed in December.

Credit standards, however, somewhat tightened at 13 percent of the institutions surveyed, the Fed reported.

About a third of the bankers surveyed indicated that demand for HELOCs had weakened over the prior 90 days. Respondents were asked to consider only funds that were actually disbursed and not requests for new or increased credit lines.

Just 11 percent of the surveyed group indicated that demand had strengthened. The latest responses were in contrast to the October survey, when more than 36 percent reported stronger demand.

“For loans to households, banks reported that lending standards tightened or remained basically unchanged across all categories of residential real estate  loans, and demand for these loans weakened,” the report stated. “In addition, banks reported tighter standards and weaker demand for home-equity lines of credit.”