Expectations for prime rate cuts this year have cooled from as many as four to two or fewer, so it’s fair to assume hopes for an elevated volume of home equity lines of credit (HELOC) would have dwindled. But keen to encourage growth in 2025, lenders are throwing their weight behind the product through promotional offers. The year kicked off with nearly one-third of lenders offering a shiny, highly marketable intro rate ranging from 2.99% or less to 7% or more, with terms anywhere from six to 60 months (see first chart).
Frequency of HELOC Intro Rates in Use
Source: Curinos Informagic
Qualifications, terms and rates may vary, but these offers all have one thing in common: up-front discounts from the current prime rate of 7.5% for a limited period of time to encourage better draw behavior. And it’s working, according to Curinos LendersBenchmark Analyzer, even despite some discomfort on the part of lenders to give up margin.
HELOC portfolio balances in April saw their highest month-over-month growth since September 2022. That’s in addition to origination volume increasing by nearly 20% compared to the same period last year. These findings are supported by an incline in second-lien utilization rates, which have bucked the trend since 2012 of falling utilization rates (see second chart).
HELOC Utilization Trends by Lien – All Vintages
Source: LendersBenchmark HE Portfolio
The HELOC market may not see as much rate relief from the Fed as expected, but positive performance from promotional offers is proving that lenders have levers they can pull to get stragglers off the sidelines.
