Banks are anticipating a boom time for home equity loans.
With home values rising, consumers have more borrowing power. And lenders want to create home equity lines of credit to offset faltering mortgage originations … and a refinancing wave that is fizzling out.
Average home prices are up 35 percent since the market bottomed out in 2012, S&P/Case-Shiller reports. New homes families looking at are costly and might not be what they’re looking for. So instead of buying or moving, they are choosing to remodel or add a room.
One study showed that the average home equity loan last year was for about $119,000. But economists say the borrowing binge isn’t looking like bad news.
Credit-reporting agency Equifax has announced that lenders originated $546 billion in home equity loans in 2015.
“Consumers are more comfortable using the equity in their house,” says Brendan Coughlin head of consumer lending for Citizens Bank, the No. 6 home equity lender.
Quoted in USA Today, Coughlin says, “The housing market is improving, consumer confidence is also improving, and unemployment is declining.”
During the housing boom of the mid-2000s, homeowners took out equity lines of credit for everything from vacations to boats. Now they’re drawing on them for home improvements as well as debt consolidation, emergencies and education expenses, Coughlin says.
They are not turning their homes into ATMs.