Home equity lines of credit (HELOC) are surging in popularity among consumers, a new analysis finds.
“We now have seen HELOC origination growth in each of the past 13 quarters with annual growth of nearly 22% in both 2013 and 2014,” said Shaun Richardson, vice president of business Intelligence/technology, Icon Advisory Group, Ltd., in a statement.
Overall, HELOC originations grew 22% in 2014, on the back of 21% growth in 2013, according to the analysis by the Consumer Bankers Association’s (CBA) Home Equity Lending Committee in collaboration with Icon Advisory Group, Ltd. As of March 15, 2015, HELOC originations are up 36% versus the same period last year.
Contributing to HELOC origination growth are recovering home values and improving consumer confidence, said Nancy Elkus, vice president, senior consumer lending product manager at Fifth Third Bank and the Chair of CBA’s Home Equity Lending Committee. HELOC applications increased 25% in 2014, data show.
Recovering home values have helped grow average line sizes by 7%, while increasing consumer confidence has helped increase balances by nearly 10%, data show.
While consumer demand for HELOC’s is rising across the country, the strongest growth rates have been in the West (28%), Midwest (26%), and South (24%), according to the findings.
“This growth was driven almost exclusively by borrowers with very low risk credit profiles and strong equity positions in their homes,” CBA said, noting that the weighted average credit score of HELOC borrowers during 2014 was 777.
“Recent performance characteristics show lenders are meeting borrowers’ needs in a prudent and responsible manner,” Elkus said.
Written by Cassandra Dowell