31% Increase In Q4 HEL Originations, Modest Rise In HELOCs

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31% Increase In Q4 HEL Originations, Modest Rise In HELOCs

May 22, 2023 | News | 0 comments

During the last quarter of the previous year, there was a significant increase of almost 30% in the amount of closed-end home equity loans compared to the same period in the previous year. Additionally, there was also an upward trend in lending for home-secured credit lines. With the rise in unsecured debt, it is expected that there will be an increase in second-mortgage consolidation loans.

TransUnion’s Q1 2023 TransUnion Credit Industry Insights Report unveiled that in the final quarter of 2022, lenders concluded a total of 263,728 home-equity loans. The report indicated that this figure, which is reported with a one-month delay, decreased compared to the 322,537 home-equity loans closed in the preceding quarter.

On the other hand, there was a notable improvement in the origination of home-equity loans (HELs) compared to the first quarter of 2021. The number of HELs originated increased significantly from 201,381 during that period.

According to the report, a total of 298,694 home-equity lines of credit (HELOCs) were originated, showing a decline from the 405,646 units recorded in the third quarter. However, it should be noted that the volume of credit lines opened increased compared to the 278,230 units reported in the same period a year ago.

In the report, TransUnion Senior Vice President and Mortgage Business Leader Joe Mellman noted that the current higher interest rate environment has had a negative impact on mortgage refinancing, especially rate and term refinance. However, Mellman found it interesting that cash-out refinance hasn’t been affected as much. He pointed out that despite the higher interest rates, the increase in originations of home-equity lines of credit (HELOCs) and home-equity loans suggests that homeowners are still interested in accessing their home equity.

TransUnion’s data analysis reveals that the annual originations of home equity reached a total of 2,491,267 units in 2022, marking an increase from the 1,837,247 units recorded in 2021. Within the 2022 total, there were 1.405 million home-equity lines of credit (HELOCs), showing a significant rise of 34 percent compared to the previous year. Additionally, there were 1.086 million home-equity loans (HELs), experiencing a notable increase of 38 percent.

Due to the record-breaking level of credit card and personal loan originations reported by TransUnion, it is expected that a greater number of homeowners will consider utilizing home-equity bill consolidation loans.