HELOC Balances Jump $23B in Q3, Highest Since 2005 - NY Fed Report
Published on · Source: cnbc.com
AI Summary
Summarized by AI from the source belowHomeowners increased their home equity lines of credit (HELOC) balances by $23 billion in the third quarter, the largest rise since 2005, according to the Federal Reserve Bank of New York. This brings total outstanding HELOC balances to $481 billion, marking the 18th consecutive quarterly increase. HELOC balances peaked at about $714 billion in early 2009.
The rise in HELOC borrowing comes amid a sluggish housing market and a mortgage rate lock-in effect, where 49.1% of outstanding mortgages had rates at or below 4% in the second quarter. Many homeowners avoid refinancing at higher current borrowing costs. The median existing home price was $417,500 in September, about 54% higher than in 2019, while the average 30-year mortgage rate stood at 7.3%. Homeowners tap HELOCs to access equity without losing their low mortgage interest rates.
Mortgage holders had $17.5 trillion in home equity in the third quarter, with tappable equity rising 1.2% year-over-year to $204,000 per borrower on average. The average HELOC rate is 7.49% and typically has a variable interest rate tied to benchmarks influenced by Federal Reserve policy. This information matters as rising HELOC usage may affect household spending and borrowing costs amid higher interest rates.
Informational only, not financial advice. Content is AI-generated and may contain errors. How this works.
Our take
Opinion from the Newsstocks AI desk, not investment adviceThe report shows sustained and significant growth in HELOC usage amid a high interest rate environment. This suggests homeowners prefer accessing equity through lines of credit to avoid losing low fixed mortgage rates. The rising HELOC balances indicate consumer borrowing remains active despite housing market sluggishness. Continued rate increases could raise borrowing costs on HELOCs, potentially impacting household budgets.
Key numbers
- HELOC balance increase in Q3
- $23 billion
- Total outstanding HELOC balances
- $481 billion
- Median existing home price in September
- $417,500
- Average 30-year mortgage rate
- 7.3%
What could help
- Homeowners can borrow against equity without losing low mortgage rates due to rate lock-in.
- Tappable home equity increased, indicating available borrowing capacity for consumers.
What could hurt
- HELOC interest rates are variable and may rise with increases in benchmark rates influenced by the Federal Reserve.
- Higher mortgage rates may discourage home purchases, limiting housing market activity.
The background
HELOCs allow homeowners to borrow against their home equity over time, typically with a variable interest rate. They provide access to cash without refinancing the entire mortgage.
Questions readers ask
What is the current average HELOC interest rate?
The average HELOC interest rate is 7.49%, and it typically varies based on benchmark rates influenced by the Federal Reserve.
How much home equity do mortgage holders have overall?
Mortgage holders collectively had $17.5 trillion in home equity as of the third quarter.
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