HELOCs In High Demand Amid Rising Housing Prices And Interest Rates

Faced with skyrocketing housing prices and rising interest rates, homeowners are searching for home equity lines of credit (HELOCs) at record rates, according to an analysis of Google search data.

Searches for “HELOC” skyrocketed 305% so far this year, according to the analysis commissioned by California-based luxury real estate firm RubyHome.

“Homeowners that bought a few years ago at lower prices and lower interest rates can feel trapped,” RubyHome CEO Tony Mariotti. “If they’ve considered buying a new home, they’ve looked around at today’s higher home prices and also know they can never replace the historically low-interest rate they have now.”

A HELOC is a loan that homeowners can get based on the equity they’ve built in their homes. Equity is the difference between the home’s appraised value and the mortgage balance.

If a homeowner needs extra cash, a HELOC allows them to borrow funds from their home’s equity. The funds can be used for significant expenses like a new roof or to pay off other debts like car loans.

The top 10 states where people are searching for HELOCs are:

1. Hawaii
2. Utah
3. Colorado
4. Washington
5. Idaho
6. Tennessee
7. California
8. Arizona
9. Nevada
10. Florida 

This information comes as the U.S. housing market sees mortgage rates rising by more than 22% from this time last year. The average price of a house is up 1.2 percent to $348,853, according to Zillow.

“Even though home equity loans carry a higher rate, a small loan for home improvement still works in their favor — the blended rate of the HELOC with their first mortgage is still below market rates for a new first mortgage,” Mariotti said.

The Mortgage Bankers Association’s Home Equity Lending Study found that originations of open-ended HELOCs and closed-end home equity loans increased 50% in 2022 compared to two years earlier, with home renovations and remodeling driving demand.

Other borrower reasons were for debt consolidation (25%) and emergency cash management or other (10%), according to the association’s recently released report.

“The housing inventory shortage, combined with home-price appreciation and a low-rate first mortgage, make home renovations an attractive alternative for many homeowners who are looking to improve their spaces,” said Marina Walsh, the association’s vice president of industry analysis. “Additionally, a HELOC or home equity loan is one way to finance big home projects while receiving a tax advantage through the deductibility of mortgage interest.”

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