Mortgage lenders are predicting home equity (HE) loan originations will go up by a modest level in 2020 despite mixed activity this year and declines last year, according to the Mortgage Bankers Association’s (MBA) inaugural 2019 Home Equity Lending Study
The MBA report, which covered data through Dec. 31, 2018, determined that the debt outstanding for home equity lines of credit (HELOCs) dropped two percent from beginning to end-of-year 2018, as borrower utilization rates declined.
HELOC utilization rates averaged 46 percent in 2018, while the percentage of HELOC accounts with no outstanding balance as of year-end 2018 was 27 percent. For this year, HELOC lenders expect annual originations to drop 3.8 percent, but they also expect a 3.4 percent growth in 2020. HELOC debt outstanding on a year-over-year basis are expected to drop 2.9 percent this year and 2.1 percent in 2020.
Furthermore, the MBA found HE loan debt outstanding dropped 5 percent from the beginning to the end of 2018, with 76 percent of accounts being more than three years old in 2018. Still, HE lenders anticipate annual originations to grow by 7.8 percent in 2019 and 8.4 percent in 2020,
“Many households are not tapping the equity in their homes, despite the significant rise in home equity since the Great Recession, wage growth, and low unemployment,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “Our study found that lenders do not anticipate a significant ramp-up in activity through 2020 because of various challenges, including other viable consumer financing alternatives, pricing pressures and competition, and rising costs. Furthermore, changing borrower sentiment and confusion over tax deductibility appear to have contributed to lackluster lending activity in recent years, as well as muted expectations going forward.”