Owners’ equity in their property assets - the part that’s mortgage-free - has climbed sharply since the pandemic to levels last seen in the 1960s.
Updated: 2 minutes agoHomes in the Moss Creek subdivision, photographed on Thursday, Aug. 22, 2024 in South Anchorage.
Home equity loans give people with substantial wealth locked up in a house the ability to take money out to fund things like renovations or debt consolidation or a family vacation without having to refinance their entire existing mortgage. We’ve started to see a slow but consistent rise in such loans on bank balance sheets, with 2025 looking like a year of growth for a product that fell out of favor after the subprime mortgage crisis.
There are two types of home equity loans. Fixed-rate loans function as a second mortgage with a lump sum being borrowed, a predetermined repayment schedule, and usually a fixed interest rate. And there are home equity lines of credit, or HELOCs, which act more like credit cards; they have variable interest rates and allow borrowing up to a set limit.
So if a homeowner with a 3% mortgage wants to borrow to redo a kitchen or build an extension, a HELOC may well appeal. Bank OZK, a regional bank that operates in states including Florida, Georgia, North Carolina and Texas, is advertising HELOC rates of 9%, which it calculates based on the Wall Street Journal’s Prime Rate plus a margin. That rate could easily fall to 7% or 8% once the Fed gets going.
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