Equifax: Debt Climbs For First Mortgages, But Declines In Home Equity Lending

According to data from the February 2016 Equifax National Consumer Credit Trends Report, the total balance of outstanding first mortgages in January is more than $8.3 trillion, an increase of 2.1 percent from same time a year ago. Conversely, during that same period, the total outstanding balance for home equity loans has steadily declined. The changes include:

  • Home equity installment: a decrease of 5.1 percent (from $138.5 billion to $131.4 billion); and
  • Home Equity Lines of Credit (HELOCs): a decrease of 3.7 percent (from $514.2 billion to $495 billion);

“Home purchase activity accelerated in 2016 as economic conditions boosted consumer confidence,” said Amy Crews Cutts, Chief Economist atEquifax. “When first-time homebuyers move into homeownership or existing homeowners upgrade to a larger, more expensive home, new debt is created. This trend is finally dominating the accelerated amortization from borrowers paying a little extra each month or paying their mortgages in full, and foreclosure activity is also greatly diminished.”

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“With many home equity lines of credit (HELOCs) hitting their recast into amortization we are seeing increased payoffs, reducing the debt and numbers of HELOCs outstanding. About 20 to 25 percent of HELOCs active a year prior to their recast anniversary will payoff and close within the year after date. Originations of new loans are not keeping pace with the payoffs.”

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The total number of existing first mortgages is 50.1 million, an increase of 0.4 percent from January 2015-2016. In that same time, the total number of HELOCs and home equity installment loans declined 3.2 percent and 2.5 percent, respectively.