Home Equity Loans Back in Vogue as Cash-Out Refis Fade

Source: American Banker

Higher interest rates are crushing mortgage refinancing volumes, but homeowners are increasingly turning to second loans and are unlikely to slow down soon.

Lenders originated some $100.8 billion in home equity lines of credit, or HELOCs, through the first five months of the year, up nearly 50% from last year, according to a report from the Urban Institute's Housing Finance Policy Center. Home equity loan originations saw a slightly smaller jump, totaling $38.1 billion through the end of May.

Further increases are likely ahead as higher mortgage rates — which climbed above 5.5% last month — reverse the refinancing boom that resulted from mortgage rates falling sharply earlier in the pandemic.