Homeowners in USA favour home equity loans

As a result of significant gains following years of rising housing prices, homeowners are increasingly drawing on their equity. According to TransUnion data, homeowners took out 333,537 home equity loans in the third quarter of last year. The credit bureau reported that this is the highest number of home equity loans on record dating back to 2010 and represents a 47% rise from the same quarter in 2021.

According to TransUnion, banks also extended 405,646 home equity lines of credit, or HELOCs, to borrowers in the third quarter, up 41% from a year earlier. The transition is a part of a broader increase in credit usage as household budgets are squeezed by rising food, gas, and other need prices.

According to TransUnion, credit card balances reached a record-high $931 billion in the final three months of 2022, up over 19% from the same period the previous year. A record $222 billion was owed on unsecured personal loans. Homeowners mostly use the equity they have available to them for debt consolidation, home renovation projects, and large-ticket purchases.

Home equity has become an attractive alternative because of years of growing home values. According to TransUnion, tappable homeowner equity reached an all-time high of $20.2 trillion in the third quarter, up 18% over the same period last year. Many homeowners used cash-out refinancing in 2021 and 2022, when mortgage rates were almost at historic lows, to access their significant gains in home equity. Then last year, everything changed.

In 2022, a sudden increase in mortgage rates sent the housing market into a roughly 12-month decline. Home sales plummeted as 30-year mortgage rates rose to their highest level since 2008, and the market for mortgage refinancing drew to a halt. Refinancing had reached a record-low by the end of the third quarter, down 84% from a year earlier, according to TransUnion.

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Homeowners in USA favour home equity loans

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