Home Equity Lending News

Q3 HEL Originations Up as HELOCs Slip

The number of home-equity lines of credit that were opened dipped between the second and third quarters of last year.  But closed-end home-equity loan production jumped 9 percent. Both types of cash-out junior liens are likely to see strong demand thanks to economic headwinds and rising credit card debt.

Increasing interest rates and high inflation have homeowners taking out HELOCs to help cope with today’s financial pressures and better position themselves for an evolving landscape, according to TransUnion’s Q4 2022 Quarterly Credit Industry Insights Report.

Debt consolidation, home improvement and big-ticket purchases are the primary reasons homeowners access their home equity, TransUnion SVP and Mortgage Business Leader Joe Mellman said in the report.

“HELOCs and home-equity loans continue to grow at unprecedented levels as homeowners increasingly take advantage of the record levels of tappable home equity they have built in their homes. … Lenders who will benefit from this trend are those who have the ability to identify and reach homeowners who have equity available to tap and who also, either carry high interest rate debt that can be consolidated or own older homes that may warrant improvements,” Mellman stated.

The report indicated credit card balances reached a record high $930 billion as of Sept. 30.

In the third quarter, 405,646 HELOCs were originated, the report said. Activity retreated from 409,110 three months earlier, though volume has significantly accelerated from 286,925 in the third-quarter 2021.

HEL production was 322,537 in the third quarter, jumping from 296,723 three months earlier and 220,144 one year earlier.

TransUnion VP of U.S. Research and Consulting Michele Raneri noted in the announcement that they anticipate Federal Reserve rate hikes might continue for at least a few more months.

“If more moderated rate hikes continue, it would be a good sign that the increases have been working, and that some relief from high inflation may be on the horizon,” Raneri stated. “Until then, we fully expect consumers to continue to look to credit products such as credit cards, HELOCs and unsecured personal loans to help make ends meet and put themselves in stronger financial standing moving forward.”