Home Equity Lending News

Demand, Credit Availability Improving for HELOCs, HELs as 1st Mortgage Cashouts Fade

Agency Cashout, HELOC, and Home Equity Loan Originations – January to MayHome Equity Volume graph 2017-2022Source: Equifax, eMBS and Urban Institue calculations.
Note: Cashout volumes for 2017 and 2018 exclude Fannie as it did not separate cashouts prior to Aug 2018.



A new Urban Institute report indicates that homeowners who were formerly prospects for first mortgage cashout transactions are now more likely to take out a cashout second mortgage. With home-equity demand growing, lenders are expected to increase credit availability.

Of the $12.8 trillion in outstanding U.S. mortgages as of the first quarter, approximately 3.1 percent — or roughly $400 billion are home-equity loans. That is according to data reported in Housing finance at a Glance – A Monthly Chartbook.

“With the economics of cashout refinance worsening amidst higher rates, homeowners are showing increased willingness to use home equity lines of credit and home equity loans to tap equity,” the report said.

The authors suggested that because first mortgage cashout transactions will likely remain “muted for the foreseeable future,” demand for HELs and HELOCs will continue to be strong as homeowners in need of cash decline to give up their existing ultra-low first mortgage rates.

Another factor in the bright outlook for junior lien activity is the housing supply shortage and
substantial accumulated equity for existing homeowners.

Credit availability for home-equity products is expected to improve as lenders search for ways to approve more borrowers and maintain originations.

Joel Kan, associate vice president of economics and industry forecasting for the Mortgage Bankers Association, said in a separate statement that credit availability for HELOCs improved in August, adding, “With aggregate home equity still at elevated levels, HELOCs could benefit borrowers who might not want to give up on their current, low mortgage rate but do want to utilize their home equity to support other spending plans.”

The Urban Institute report said, “HELOCs and home equity lending volumes seem poised to grow in the near future.”

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