Surge In Home Equity Lending Fueled By Renovation Demand In 2022

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Surge In Home Equity Lending Fueled By Renovation Demand In 2022

Aug 1, 2023 | News | 0 comments

According to the Mortgage Bankers Association’s (MBA) Home Equity Lending Study, which was reissued for the first time since 2020, Home Equity Lines of Credit (HELOCs) and closed-end home equity loans experienced a remarkable 50% surge in 2022 compared to 2020.

Marina Walsh, CMB, MBA’s VP of Industry Analysis, stated that the demand for home equity products in 2022 was mainly driven by home renovations and remodeling. Approximately two-thirds of borrowers applied for a home equity loan for this purpose. Other reasons cited by borrowers included debt consolidation (25%) and managing emergency cash or other needs (10%).

Walsh mentioned that the scarcity of housing inventory, coupled with the appreciation of home prices and the availability of low-rate first mortgages, has made home renovations an appealing option for many homeowners seeking to enhance their living spaces. Furthermore, utilizing a HELOC or home equity loan provides a means to finance significant home projects while benefiting from a tax advantage due to the deductibility of mortgage interest.

Continuing her remarks, Walsh highlighted the vast untapped potential for home equity lending, given the substantial accumulated equity of nearly $30 trillion in real estate. According to respondents, there are crucial initiatives for lenders to harness this potential successfully. These initiatives include enhancing consumer education, embracing technological innovation, prioritizing fast and efficient delivery of services, and developing tailored products and targeted marketing strategies for specific customer segments.

In the spring of 2023, the Mortgage Bankers Association (MBA) conducted its Home Equity Lending Study, focusing on open-ended HELOCs and closed-end home equity loans for lending and servicing. For this study, MBA gathered data from 20 member companies, comprising a mix of large banks, community banks, and credit unions. The data represented a substantial volume of $37.8 billion in originations for the year 2022, a maximum credit extension of $211.1 billion to borrowers as of December 31, 2022, and outstanding borrowings amounting to $81.1 billion as of the same date.

The study’s comprehensive report encompasses various benchmarking data, including volume and product mixes, utilization rates, operational metrics, and growth expectations.