According to the Mortgage Bankers Association’s (MBA) Home Equity Lending Study, released for the first time since 2020, originations of open-ended home equity lines of credit (HELOCs) and closed-end home equity loans increased 50% in 2022 compared to two years earlier.
“Home renovations and remodeling drove demand for home equity products in 2022, with roughly two-thirds of borrowers citing it as a reason for applying for a home equity loan,” says Marina Walsh, CMB, MBA’s vice president of industry analysis. “Other borrower reasons were for debt consolidation (25%) and emergency cash management or other (10%).
“A HELOC or home equity loan is one way to finance big home projects while receiving a tax advantage through the deductibility of mortgage interest,” adds Walsh. “Given the nearly $30 trillion of accumulated equity in real estate, there is untapped potential for home equity lending for lenders and borrowers.”
MBA’s Home Equity Lending Study for lending and servicing open-ended HELOCs and closed-end home equity loans was conducted in the spring of 2023. MBA collected data from 20 member companies representing $37.8 billion in originations volume for 2022; $211.1 billion in maximum credit extended to borrowers as of December 31, 2022; and $81.1 billion in outstanding borrowings as of December 31, 2022. Select findings include:
- Average HELOC commitment volume (total credit offered) was $2.4 billion per repeater company in 2022, up 41% from $1.7 billion in 2020.
- Irrespective of origination year, average HELOC utilization based on dollar volume was 34% in 2022, compared to 40% in 2020.
- The percentage of HELOC accounts with no outstanding balance as of year-end 2022 was 31%. The percentage of HELOC accounts funded to the contractual limit was 3%.
- Average CLTV for funded HELOCs at closing dropped to 51% in 2022 from 54% in 2020, due in part to strong home-price appreciation nationwide. On an annual basis, lenders expect HELOC debt outstanding to increase 8.2% this year and 9.9% in 2024.
- Average home equity loan originations were $780 million per repeater company in 2022, up 166% from $293 million in 2020
- Average CLTV at closing dropped to 58% in 2022 from 65% in 2020.
- Lenders expect home equity loan debt outstanding to increase 11.4% in 2023 but decrease 5.6% in 2024.
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