The first three months of 2018 saw homeowners’ tappable equity surged by $380 billion to $5.8 trillion, the largest recorded amount of equity held by US homeowners with mortgages.
It was the largest quarterly growth in tappable equity since Black Knight Financial began tracking the metric in 2005.
The average mortgage holder gained $14,700 in tappable equity over the past year and has $113,900 in total.
Nearly 80% of the nation's tappable equity is held by homeowners with first-lien interest rates at or below 4.5%, with 60% of the total being held by those with current rates below 4.0%.
But homeowners are less keen to tap that equity with a drop of almost 7% in equity tapped quarter-over-quarter, meaning just 1.17% of available equity was tapped in Q1 2018, the lowest share since Q1 2014.
"In Q1 2018, homeowners with mortgages withdrew $63 billion in equity via cash-out refinances or HELOCs," said Ben Graboske, executive vice president of Black Knight's Data & Analytics division. "That represents a slight 1% increase from the same time last year, despite the fact that the amount of equity available for homeowners to borrow against increased by 16% over the same time period.”
That's the lowest quarterly share in four years, and the second lowest since the housing recovery began six years ago.
HELOC volume drops to 2-year low
“Somewhat surprisingly, even though rising first-lien interest rates normally produce an increase in HELOC lending, the volume of equity withdrawn via lines of credit dropped to a two-year low as well,” added Graboske.
However, he says that there is a factor that is likely driving the decline in HELOC equity utilization; the increasing spread between first-lien mortgage rates and HELOC rates, which reached 1.5% late last year, the widest Black Knight has seen since it began tracking it 10 years ago.
“The distance between the two has closed somewhat in Q2 as 30-year mortgage rates have been on the rise, which does suggest the market remains ripe for relatively low-risk HELOC lending expansion,” said Graboske.
However, he notes that increasing costs in the form of higher interest rates appear to have impacted homeowners' borrowing decisions in Q1 2018.
“We should also remember that the Federal Reserve raised its target interest rate again at its June meeting, which will likely further increase the standard interest rate on HELOCs in Q3 2018. Black Knight will continue to monitor the situation moving forward," he said.
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