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LOS ANGELES: Homeowners are increasingly tapping into their equity, taking advantage of big gains after years of rising housing prices.
Homeowners took out about 333,537 home equity loans in the third quarter of last year. transunion,
That’s an increase of nearly 47% from the same quarter in 2021, the most home equity loans on record dating back to 2010, the credit bureau said.
TransUnion said banks also provided some 405,646 home equity lines of credit, or HELOCs, to borrowers in the third quarter, up 41% from a year earlier.
“HELOCs and home equity loans continue to grow at unprecedented levels as homeowners increasingly take advantage of record levels of tappable home equity built up in their homes,” said joe mailmanMortgage Business Leader at TransUnion.
The change is part of a wider increase in credit access as higher prices for food, gas and other necessities squeeze household budgets.
TransUnion said credit card balances are expected to rise to a record $931 billion in the last three months of 2022, up nearly 19% from a year ago. Unsecured personal loan balances reached a record $222 billion.
Homeowners use the equity they have available primarily to consolidate debt, finance home improvement projects, and pay for large purchases.
Years of rising home values have made home equity an attractive option. TransUnion said tappable homeowner equity rose 18% in the third quarter from a year earlier to an all-time high of $20.2 trillion.
In 2021 and 2022, when mortgage rates were near historic lows, many homeowners realized their large home equity gains through cash-out refinances. But that all changed last year.
A sharp increase in mortgage rates in 2022 plunges the housing market into an almost year-long recession. Rates on 30-year home loans rose to their highest levels since 2008, slowing home sales and reducing demand for mortgage refinancing.
TransUnion said that as of the end of the third quarter, refinancings were down 84% from a year earlier.
“This overall demand to tap home equity has been there for a few years, it’s just shifting from cash-out refs to HELOCs and[home equity loans],” Melman said.
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