Homeowners are increasingly tapping into the equity in their homes, with originations of open-ended home equity lines of credit (HELOCs) and closed-end home equity loans increasing by a combined 7.2% year over year in 2024.
Those findings come from a comprehensive study of home equity lending by the Mortgage Bankers Association (MBA), which also found that total HELOC and home equity loan debt grew 10.3% last year.
“With close to $35 trillion of homeowner equity in residential real estate and many homeowners locked into low-rate first mortgages, HELOCs and home equity loans have become the product of choice for many homeowners,” Marina Walsh, MBA’s vice president of industry analysis, said in a press release.
Walsh added that lenders expect HELOC debt to grow by 10% in 2025 and home equity loan debt to rise 7%.
The MBA launched its annual home equity lending study in 2019. The association suspended the study for one year in 2022, as record-low interest rates in 2020-21 saw some lenders exit the home equity lending space altogether amid a borrower shift toward cash-out refinancing opportunities.
But interest in home equity lending has been increasing over the past few years as mortgage rates have climbed, the MBA report found, though borrowers’ reasons for accessing their home equity are shifting. In 2022, 65% of borrowers cited home renovations as the main reason for applying for a home equity loan. In 2024, that percentage dropped to 46%.
Instead, more homeowners are looking to pay off other debt, with 39% of home equity borrowers citing debt consolidation in 2024 versus just 25% in 2022.
At a company level, average HELOC commitment volume was $1.7 billion per lender in 2024, up from $1.6 billion in 2023. Home equity loan originations averaged $844 million per company last year compared to $788 million in 2023.
The MBA sees more runway ahead in the home equity lending space, as homeowners have borrowed less than 2% of their accumulated equity over the past two years. Additionally, the association believes more borrowers will tap into home equity if the economy worsens.
But challenges remain, Walsh observes, as “just 50% of home equity applications are closing, and turn times are averaging 39 days.”
Walsh cites automated valuations, integrations with mortgage platforms and accessible self-service options as ways lenders can increase efficiency and reduce costs amid growing demand for home equity lending.
