HELOC loans surge in late 2021 amid rising mortgage rates: TransUnion

HELOC loans rose in the fourth quarter of 2021 amid rising mortgage rates, according to TransUnion. (iStock)

According to a new report of TransUnion.

According to Freddie Mac Data. But the values ​​of the house are also on the riseencouraging owners to dip into their capital despite the rise in interest rates.

As mortgage rates rise, homeowners are turning away from traditional mortgage refinancing and toward home equity lines of credit (HELOCs), TransUnion said in its Credit Industry Quarterly Report (CIIR) for the first quarter of 2022. new home equity loans grew 4% annually and 80% from 2018 to 1.2 million total issuances.

When comparing home equity loan types, fewer homeowners are navigating to cash refinances, which fell 6% annually in the fourth quarter, according to TransUnion. Meanwhile, HELOCs were up 31% year over year in the fourth quarter of 2021 and home equity loans were up 13%.

If you want to leverage the value of your home, using an online marketplace like Credible can help you find the best option for a cash-out refinance. Visit Credible to find your personalized interest rate without affecting your credit score.

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Inflation pushes consumers towards alternative forms of credit

Inflation remained close to its highest level in 40 years in April, the consumer price index (CPI) reached an annual increase of 8.3%, according to the latest data from the Bureau of Labor Statistics (BLS).

“Compared to a year ago, the price of everything from filling a tank of gas to buying a carton of eggs has gone up due to inflation,” said Michele Raneri , vice president of research and consulting at TransUnion. “Since many consumers’ wages have not kept up with inflation, people are spending more to get less.

“However, there are several bright spots to note, including low unemployment, lenders increasing access to credit, and strong consumer performance,” Raneri said. “These are all indications that consumers are well positioned as the economy continues to find its footing in the face of financial volatility from the pandemic.”

The total number of new mortgages has fallen by 28% per year as mortgage rates rise, but HELOCs have grown significantly over the past year because they allow homeowners to take money out of their homes without change the interest rate on their entire mortgage. While a borrower’s interest rate on the HELOC may be higher than the rate on the entire mortgage, it’s still likely to be lower than the interest rate on a personal loan, TransUnion said.

Although Credible does not offer HELOC, their marketplace does provide you with cash mortgage refinance options, which also allow you to tap into the equity in your home. You can visit Credible to compare multiple mortgage lenders at once and choose the one that suits you best.

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Rising home prices make more funds available to homeowners

Due to rising home prices, the average size of new mortgages has increased 7% per year to $315,543, according to TransUnion. Rising house prices hit double digits in 70% of real estate markets in the first quarter of 2022, according to the National Association of Realtors (NAR). This allows homeowners to take out a higher line of credit to their home.

“Rising interest rates have had an impact on mortgage origination volume,” said Joe Mellman, TransUnion’s senior vice president and chief mortgage officer. “There is less incentive to go through rate and term refinancing and for those looking to buy a home, low inventory and high home prices present a challenge.

“A marginal reduction in new cash refinance volumes and a substantial increase in HELOC loans and home equity loans indicate that for those who already own, the continued appreciation in home prices presents an opportunity to take advantage of growing equity in property and accessing cheaper lending capital,” Mellman said. “Mortgage lenders can support growth in a sluggish market by leveraging tools that can identify and reach consumers who are in the market to exploit the equity in their available property.”

If you’re interested in cashing out the growing value of your home or potentially lowering your monthly payments, you may want to consider cash refinancing. To see if this is the right option for you, you can contact Credible to speak to a mortgage expert and get all your questions answered.

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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