Consumer Appetite for HELOCs Increased in 2014
Home equity lines of credit originations have increased 21.5% in 2014 from a year earlier, according to Equifax's National Consumer Credit Trends Report.
Approximately $120 billion in HELOCs was originated in 2014, the Atlanta-based data provider revealed. Additionally, more than 1.2 million new HELOCs were opened last year, which is up 16% from the previous year.
There are more borrowers attracted to HELOCs now because they have "sizeable equity" in their homes since property values have risen nearly 26% on average since January 2011, said Equifax Chief Economist Amy Crew Cutts.
"Over the next several years HELOCs should enjoy a lot of consumer interest as a way to maintain low rates on their primary mortgage while also gaining access to accumulated home equity for home improvements, tuition or other important uses," Crew Cutts said.
Meanwhile, mortgage industry write-offs declined year over year from February 2014 due to improving labor markets and fewer delinquencies. For example, Equifax reported that home equity revolving lines of credit were down 33%, first mortgages dropped 30%, and home equity installment loans decreased by 18%.
Furthermore, total mortgage balances and accounts are falling. At the end of February, first-mortgage balances were down 1% from the prior year, at approximately $8.2 billion. There were also 49.9 million accounts, Equifax said.
Additionally, home equity installment loans had a 17% decline in balances and an 11% drop in accounts from last February, at $137 billion and 4.6 million, respectively.
Lastly, home equity revolving lines of credit balances were $512 billion from 11.4 million accounts, which is a respective decrease of 3.2% and 5%.
"Rising home values are also helping pull more homeowners back into the black on their mortgages and reducing the incentive to default," Crew Cutts said. "These trends show no signs of slowing so 2015 should see further improvements in mortgage and home equity loan performance."