The Mortgage Bankers Association (MBA) published its Home Equity Lending Study for the first time since 2020 and determined originations of open-ended Home Equity Lines of Credit (HELOCs) and closed-end home equity loans were up 50% in 2022 compared to two years earlier when the Covid-19 pandemic began.
The new study found the average HELOC commitment volume (total credit offered) was $2.4 billion per repeater company in 2022, up 41% from $1.7 billion in 2020.
The FICO score of the average HELOC borrower dropped to 769 in 2022 from 780 in 2020 while the average combined loan-to-value for funded HELOCs at closing dropped to 51% in 2022 from 54% in 2020.
The average home equity loan originations were $780 million per repeater company in 2022, up 166% from $293 million in 2020. Weighted average home equity loan balances on outstandings rose from $52,653 at the beginning of the year to $61,114 at year-end.
“Home renovations and remodeling drove demand for home equity products in 2022, with roughly two-thirds of borrowers citing it as a reason for applying for a home equity loan,” said Marina Walsh, MBA’s vice president of industry analysis. “Other borrower reasons were for debt consolidation (25%) and emergency cash management or other (10%). The housing inventory shortage, combined with home-price appreciation and a low-rate first mortgage, make home renovations an attractive alternative for many homeowners who are looking to improve their spaces. Additionally, a HELOC or home equity loan is one way to finance big home projects while receiving a tax advantage through the deductibility of mortgage interest.”
