Home Equity Lending Volume Stays Relatively Flat In 2023, Debt Outstanding Increases

Total originations of open-ended Home Equity Lines of Credit (HELOCs) and closed-end home equity loans increased in 2023 by 1.5 percent compared to the previous year, while debt outstanding increased 8.3 percent. This is according to the Mortgage Bankers Association’s (MBA) 2024 Home Equity Lending Study.

“Home equity originations were relatively flat in 2023 compared to 2022,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Even with evidence of easing credit availability, with originations activity moving to lower FICO credit scores and higher combined loan-to-value ratios, the closings to applications pull-through rate dropped, indicating that home equity lenders were doing more work for fewer loans.”

Added Walsh, “Despite the tepid volume growth in 2023, our study shows an uptick in home equity debt outstanding. The elevated mortgage rate environment slowed servicing runoff, and utilization rates also increased. Given the substantial amount of accumulated equity in real estate, there is still untapped potential for home equity lending for lenders and borrowers.”

Select findings from MBA’s 2024 Home Equity Lending Study (covering data through December 31, 2023) include:

Total:

• Total originations of open-ended Home Equity Lines of Credit (HELOCs) and closed-end home equity loans increased to $2.13 billion per company in 2023, from $2.10 billion in 2022.  
• By known borrower usage, home renovations slowed to 56 percent of volume in 2023, from 65 percent in 2022. Debt consolidation grew to 33 percent of volume in 2023, from 25 percent in 2022.
• In 2023, over 75 percent of total originations were subject to an Automated Valuation Model (AVM) or Desktop Valuation (DV), with most of both categories entailing an exterior/drive-by inspection or no inspection at all. Conversely, 22 percent of originations required a full appraisal with the majority entailing both an interior and exterior inspection. 

HELOCs:

• Average HELOC commitment volume (total credit offered) was $1.8 billion per company in 2023, down from $1.9 billion in 2022. 
• The average FICO score fell to 760 in 2023, from 769 in 2022. Average combined loan-to-value (CLTV) for funded HELOCs at closing increased to 53 percent in 2023 from 51 percent in 2022.
• Average closings-to-applications pull-through for HELOC accounts dropped to 48 percent in 2023 from 56 percent in 2022.
• Weighted average HELOC outstandings in dollars rose by 4.7 percent from the beginning of the year to the end of the year 2023.
• HELOC utilization rates (dollar volume of outstandings compared to maximum credit facility) improved in 2023 when examining the rates across origination vintage-year cohorts. For example, at nine months from origination, utilization was 47 percent in 2023 compared to 45 percent in 2022.
• Lenders expect HELOC debt outstanding to increase 2.3 percent in 2024 and 4.8 percent in 2025.

Home Equity Loans:

• Average home equity loan originations were $657 million per company in 2023, up from $428 million in 2022.
• The average FICO score fell to 742 in 2023 from 752 in 2022. Average CLTV at closing increased to 62 percent in 2023 from 58 percent in 2022.
• Average closings-to-applications pull-through for home equity accounts dropped to 39 percent in 2023 from 44 percent in 2022.
• Weighted average home equity outstandings in dollars rose by 17.6 percent from the beginning of the year to the end of the year 2023.
• Lenders expect home equity loan debt outstanding to increase 11.1 percent in 2024 and 7.2 percent in 2025.

MBA’s Home Equity Lending Study for lending and servicing open-ended HELOCs and closed-end home equity loans was conducted in the spring of 2024. MBA collected data representing $29.8 billion in originations volume for 2023; $184.5 billion in maximum credit extended to borrowers as of December 31, 2023; and $77.2 billion in outstanding borrowings as of December 31, 2023. The report includes benchmarking data such as volume and product mixes, utilization rates, operational metrics, and growth expectations.