Home equity levels continue to rise, and all signs point to a market ripe for home equity lending, according to a recent report from consumer credit reporting agency TransUnion.
Home equity levels have risen every year and are now nearing $15 trillion, surpassing its 2006 peak by more than $1 trillion. TransUnion said this fact and several other dynamics will converge to create significant growth in home equity origination.
“There are ample signs that the home equity lending market is poised for growth. Home prices have surpassed 2005 boom levels and household home equity has grown even faster,” said Joe Mellman, TransUnion’s senior vice president and mortgage business leader. “Increasing consumer debt makes debt consolidation an appealing option and home equity can be the most economically attractive path to do just that.”
Interest rates also play a role, according to Mellman.
“With rising interest rates and increases in home prices outpacing wage growth, homeowners are more likely to stay in their current homes, rather than ‘move up,’” Mellman continued. “This leads to a higher likelihood of improving their existing home and home equity can be great tool for that.”
TransUnion said its study revealed that last year, HELOCs comprised the greatest number of home equity originations with 1.2 million loans closed, a 2.3% increase from the previous year.