HELOCs are positioned to increase market share, Black Knight says
Americans with mortgages have more tappable equity than ever as home prices continued to increase in 2017, according to Black Knight’s Mortgage Monitor Report based on data as of the end of February.
Black Knight found that tappable equity totaled $5.4 trillion in 2017, the highest on record and 10% above the previous, pre-recession peak in 2005. The 2017 total represents an increase of $735 billion over the course of the year, the largest dollar-value increase over a calendar year.
In 2017, tappable equity that was withdrawn via cash-out refinances and home equity lines of credit (HELOCs) reached a new post-recession peak at an estimated $262 billion. However, Americans tapped a lower percentage of available equity in 2017 than in 2016. They withdrew less than 1.25% of all tappable equity during the fourth quarter, marking a four-year low.
Black Knight found that 55% of all equity drawn during that quarter was via HELOCs. While the share is among the lowest seen since the housing recovery began, that percentage is likely to rise along with interest rates. The report also identified a large group of low-risk HELOC candidates who hold $2.8 trillion in tappable equity and have credit scores of 760 or higher and first-lien interest rates below today’s prevailing rate.
“While rising rates tend to dampen utilization of equity in general, the market is poised for a strong shift toward HELOC utilization, as they allow borrowers to take advantage of growing equity while holding on to historically low first-lien interest rates,” Black Knight Data & Analytics Executive Vice President Ben Graboske said.