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HELOC numbers stay flat in 2018

Americans have a record amount of home equity at their disposal, but another big growth spurt in home equity lines of credit (HELOCs) hasn’t happened and likely won't in this recovery, according to Experian.  

“When you look at these numbers, we have kind of stabilized [with HELOC originations], and topped out,” said Alan Ikemura, a senior product manager and business consultant at Experian during a quarterly report on credit trends.


HELOC originations were down year to date through the first three quarters of 2018, compared to the same nine-month period in 2017, the company reported.  

The aggregate amount extended to borrowers through lines of credit through September totaled $129 billion, down from the $132 billion extended in the same three-quarter period in 2017. This number refers to the total funds available to consumers through new lines extended in the July-September period.

On a quarterly basis, HELOC originations ticked up for the third consecutive quarter, to $45 billion, up from $44 billion in the second quarter and $38 billion in the first quarter, but on an annual basis HELOC volumes have not changed substantially since 2016.

“When we were recovering [from the recession], we were going from the high 20s [$20 billion quarterly originations] into the 30s,” Ikemura said. “Now we are in the 40s and we are just consistently mid-40 range overall.”  

HELOC-draw balances also continue to fall. As of the third quarter, the total balance drawn on existing HELOCs stood at $438 billion, according to Experian. This has fallen for 12 consecutive quarters from a balance of $506 billion in the second quarter of 2015, and indicates that borrowers are paying off older HELOCs at a faster rate than borrowers are drawing on new HELOCs.

Responding to questions from Scotsman Guide News, Ikemura said HELOC numbers likely will not increase much beyond this current level. 

"The bulk of the real estate recovery and price appreciation has already taken place over the past three to five years,” he said.  “Going forward, the forecast is for prices to decline in many areas and the overall real estate market to soften. So the 'equity build' has now come to its peak.”

Also working against another big growth spurt is that consumers are already highly indebted already via credit cards and personal loans.

“Those that have wanted to extract money have probably already done so,” he said. 

Also the tough competitive pressures in the mortgage market right now haven’t made banks and credit unions more inclined to extend lines to subprime borrowers. Experian reported that 95 percent of the new lines in the third quarter went to prime and super-prime borrowers. More than half of the lines, or 52 percent, were extended to borrowers with Vantage credit scores between 781-850.

“It is the most conservative portfolio out there,” Ikemura said. “You still have to have very good credit quality to take out a HELOC.”

Experian’s figures were fairly consistent with origination numbers published by Equifax earlier this month, which indicated a fairly stable market since 2016, with line originations hovering around the $40 billion mark each quarter.

“The payoffs are happening faster than the new loans are being originated,” Equifax Chief Economist Amy Crews Cutts said during a webinar in November.

“I feel very optimistic about the consumer position vis-a-vis home equity,” she added. “We are not seeing homes being used as ATMs. Even the cash-out refinance activity is very muted today relative to what it was. So I really think from the housing side, things are looking pretty good.” 


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