From Home Equity Lending in Focus: Data-Driven Strategies for Modern Markets, a Curinos and LendTrade webinar presented on July 28 in association with Mortgage Bankers Association (MBA) featuring, from Curinos, Rich Martin, SVP, Retail Lending, Ken Flaherty, senior manager, Retail Lending, and Kinley Hicks, senior associate, Retail Lending, and, from LendTrade, Steve Schipper, Managing Director.
Despite persistently high market interest rates, or more likely because of them, the tailwinds behind home equity lending continue to accelerate, with applications, bookings and line sizes all up for the year. In part because of the residual benefits of a strong Q4, Curinos estimates that originations in 2025 will be up 6-10%, versus -2% in 2024 (despite the strong finish to the year). Sky-high interest rates on credit cards, record-high home equity values, and homeowners staying put because of elevated mortgage rates are all contributing to the demand for both home equity lines and loans. And incentives are helping: almost one-third of home equity loans (HELOCs) so far this year have been booked with an introductory promotional rate.
In this webinar, our experts looked into the data and what it might mean for home equity lending going forward. Here’s some of what they found:
1. The rise in consumer debt levels is staggering, and today’s borrowers need better financial tools to improve their cashflows.
The combination of housing and non-housing debt has gone up by more than 24% in five years. Included in that is credit card debt that has grown at the same rate as overall household debt—now topping $1 trillion—but at rates that often exceed 20%. For homeowners with tappable equity, which has burgeoned in recent years, that makes home equity’s lower rates and repayment terms a highly attractive alternative.
Consumer Debt Trending (Housing & Non-Housing)
Source: New York Fed
2. Because of the lock-in effect, the opportunity remains ripe for home equity lending.
More than two-thirds of first-mortgage holders nationwide are at a rate of less than 4.5%. That means a sizable percentage of them are more than happy to stay put—and maybe undertake home improvements—rather than moving and taking on a first mortgage at today’s rates. In fact, Curinos estimates that in a realistic scenario (illustrated below), first-mortgage rates would need to fall to below 4.5% to make a refi cash-out more attractive than supplementing a first mortgage with a home equity line of credit (HELOC), even at today’s rate of about 8%.
First Mortgage Rate Distribution
Source: LendersBenchmark FM Originations, Cotality
3. Home equity’s competitive landscape has shifted dramatically in the last five years, as non-depository lenders have taken noticeable share.
Eighty percent market share for depositories may sound pretty good, but it used to be close to 100%. Over the past decade these institutions have ceded one out of every five of their originations to fintechs, independent mortgage brokers, other non-depository lenders and home equity investment (HEI) providers. The 15% share that non-depository lenders enjoy has ballooned from 2% in only five years. It’s not that these competitors are selling different products, they’re not, and sometimes they’re even adding fees. But they’re marketing aggressively and taking friction—and, more important, time—out of the application and approval processes.
2024 Home Equity Market Distribution
Source: Curinos Lendersbenchmark HE Originations; Curinos Market Research
4. Home equity securitization is back after having been dormant for more than 15 years.
The Great Financial Crisis did a number on securitizations of home equity products. In fact, it wasn’t until 2023 that they began to show renewed signs of life. Since then, the market has taken off to the point that this year’s securitizations are expected to amount to about $20 billion, almost four times that of last year. It’s clear that increased demand for home equity lines and loans has gotten the attention of the secondary market. What makes these products attractive to homeowners is making them attractive as an asset class to investors, including their low rates of delinquency. It’s a virtuous cycle that’s likely to continue to rotate upward if current market conditions persist.
Ebb and Flow of Home Equity Securitization
Source: LendTrade
5. Products secured by real estate continue to average well above 40-day cycle times, likely shifting some borrowers to speed over need.
Non-traditional lenders close faster than depositories, by a lot, and their draws at closing are much higher. Yes, many non-traditionals require utilization at close, but it’s also possible that borrowers with a greater need are also more motivated to get their hands on their funds more quickly. If that’s the case, depositories would be well advised to speed things up, which may result in higher draws, more lines in use with higher line utilization. and fewer closings resulting in no draws at all.
Application to Booking/Funding Days by Lending Product
Source: Curinos Home Equity, Mortgage, Unsecured Originations LendersBenchmark
