HELOC market has room for growth through consumer education: TD Bank

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With nearly half of homeowners renovating in the next two years, HELOCs stand as the most likely form of lending sought out by consumers, according to TD Bank.

The bank's Home Equity Trend Watch survey showed 48% of owners plan to make or are currently making repairs or upgrades to their houses and 37% are likely to apply for a HELOC by 2021. However, those numbers could rise if loan officers better teach consumers on available financing options. Roughly a quarter of those surveyed weren't knowledgeable on home equity products and a third didn't know the equity of their home.

"The industry needs to continue educating the public around the subject," Jon Giles, head of home equity lending at TD Bank, said in an interview. "Home equity remains the lowest cost means for most people to borrow a substantial sum of money. If you're not in the spot where you're looking to refinance your first mortgage, home equity's going to be the lowest interest rate, the lowest payment and give you by far the most flexibility to use the funds as you need them."

As 36% of homes are older than 20 years and mortgage rates stay low, the renovation market should remain steady in the near future. Half of those surveyed anticipate spending over $25,000 on their home renovations, signaling the opportunity for HELOC growth.

"In the next nine months to a year, I expect this to be very stable to where we are now," Giles said. "There's talk about whether or not we'll have any reductions in rates next year — meaning prime rate reductions and Fed reductions. If we end up having some of the short-term rates come down, I expect to see a slight uptick in the home equity market."

TD Bank's survey sample includes 1,801 homeowners who purchased a house in the last 10 years.

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