With the steady rise in home values, U.S. consumers’ demand for home equity lines of credit surged in 2014, with more than $120 billion worth of HELOCs originated, a year-over-year increase of 21.5 percent, according to an update from the credit reporting agency Equifax.
More than 1.2 million new HELOCs were opened last year, which is up 16 percent from the previous year.
Meanwhile, home values on average across the nation have jumped 26 percent since January 2011, said Amy Crews Cutts, Chief Economist at Equifax.
“Over the next several years, HELOCs should continue to attract substantial consumer interest as a way to maintain low rates on primary mortgages while also gaining access to accumulated home equity for home improvements, tuition or other important uses,” Cutts said.
HELOCs are attracting more borrowers because many of them, once again, have sizeable equity in their homes, she said. Moreover, many homeowners with a low-rate first mortgage are reluctant to refinance that mortgage, especially since rules are tighter for cash-out refinancing.
Equifax also reports that mortgage industry write-offs declined year over year from February 2014 because of improving labor markets and fewer delinquencies.
“Employment gains in 2014 were huge as more than three million jobs were added to the U.S. economy,” Cutts said. “With strong improvements in labor markets mortgage delinquencies and write-offs fall. Rising home values are also helping pull more homeowners back into the black on their mortgages and reducing the incentive to default. These trends show no signs of slowing so 2015 should see further improvements in mortgage and home equity loan performance.”
Write-offs for home equity revolving lines of credit were down 33 percent, first mortgages declined 30 percent, and home equity installment loans decreased by 18 percent.
Total mortgage balances and accounts are also falling. At the end of February, first-mortgage balances were down 1 percent from the prior year, at about $8.2 billion. There were also 49.9 million accounts, Equifax said.