Home Equity Lending News

Fed Reports Q4 Growth in HELOC Balances

While first mortgage activity has been flat at banks, balances of home-secured credit lines continued to grow, according to the U.S. central banker. Even though credit is widely available for high-quality borrowers, those with lower credit scores are facing tighter conditions.

At joint meetings with the Federal Open Market Committee and the Board of Governors of the Federal Reserve on Jan. 31 and Feb. 1, officials discussed market developments.

“Market participants generally expected U.S. economic growth to moderate this year, al­though there was a wide dispersion in views about the extent of a potential slowdown,” the FOMC Minutes stated. “Market participants interpreted incoming data as pointing to moderating inflation risks.

“Against this backdrop, market participants judged that the FOMC would likely slow the pace of rate increases further at the current meeting, and respondents to the Desk’s Survey of Primary Dealers and Survey of Market Participants widely expected the Committee to implement a one-quarter percentage point increase in the target range for the federal funds rate.”

While the report indicated credit was broadly available for residential loan applicants with higher credit scores, it was considerably tighter for lower-score households.

Although first mortgage applications were flat in the latest period, it was a different story for second mortgages.

“Home-equity line-of-credit balances at banks continued to grow through the fourth quarter, on net, potentially reflecting homeowners using HELOCs as a preferred way of extracting home equity in the presence of high current mortgage rates.” the Fed stated.