HELOC - why the volume is still low?
HELOC lending has decreased, yet consumer debt is on the rise—what’s the reason?
Following the 2008 financial crisis, there was a decline in both primary mortgage and HELOC volumes. While primary mortgage volume rebounded by 2019 and continued to grow, HELOCs have seen a significant downturn.
Concurrently, consumer debt has surged, and so has tappable home equity for home owners.
This presents a paradox: there’s a clear demand (evidenced by high levels of debt), ample tappable equity, and overall growth in the mortgage market. Yet, HELOC volume is dwindling.
The reason for this is because HELOCs have become less popular due to associated risks with home prices falling significantly driving the equity adjustment for HELOCs. Banks are worried that home values may decline, they are going to be less likely to offer an equity based product because that equity could disappear.
Major financial institutions prefer to offer products with higher interest rates or greater revenue potential, such as primary mortgages. Based on the MBA data, the share of ARMs made up nearly 8% of total applications in April. Homeowners can not afford paying 7.5% fixed rate mortgages and betting on rate cut in the future to refile.
Major lenders exited the market: Wells Fargo, Citibank and JPMorgan Chase therefore the choice of the lenders offering HELOC shrunk to a few major players.
As a result, consumers are at a disadvantage, burdened with substantial high-interest debt and lacking straightforward means to leverage their equity.
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HELOC lending has decreased, yet consumer debt is on the rise—what’s the reason?
Following the 2008 financial crisis, there was a decline in both primary mortgage and HELOC volumes. While primary mortgage volume rebounded by 2019 and continued to grow, HELOCs have seen a significant downturn.
Concurrently, consumer debt has surged, and so has tappable home equity for home owners.
This presents a paradox: there’s a clear demand (evidenced by high levels of debt), ample tappable equity, and overall growth in the mortgage market. Yet, HELOC volume is dwindling.
The reason for this is because HELOCs have become less popular due to associated risks with home prices falling significantly driving the equity adjustment for HELOCs. Banks are worried that home values may decline, they are going to be less likely to offer an equity based product because that equity could disappear.
Major financial institutions prefer to offer products with higher interest rates or greater revenue potential, such as primary mortgages. Based on the MBA data, the share of ARMs made up nearly 8% of total applications in April. Homeowners can not afford paying 7.5% fixed rate mortgages and betting on rate cut in the future to refile.
Major lenders exited the market: Wells Fargo, Citibank and JPMorgan Chase therefore the choice of the lenders offering HELOC shrunk to a few major players.
As a result, consumers are at a disadvantage, burdened with substantial high-interest debt and lacking straightforward means to leverage their equity.
Our social networks:
• Youtube
• Protitleusa.com