LAGUNA BEACH, Calif.–HELOCs saw rapid growth in the fourth quarter of 2024 and the loan category is projected to escalate further throughout 2025 due to non-bank lenders, according to a new analysis.

In addition, banks tightened their HELOC standards, even as issuers eased their requirements amid a potential doubling of securitization volume this year, Home Equity Lending News (HELN)  reported.

According to the publication, the study it coonducted highlighted how traditional banks’ long-standing dominance in the home-equity lending space has “eroded.”

“Although the HELOC market has historically been bank dominated and relatively insulated from competition, a growing list of non-bank HELOC lenders has clearly changed this paradigm over the last few years,” HELN Director Vikram Gupta said in a statement. “Banks must proactively adapt if they intend to maintain competitive credibility within this increasingly dynamic segment.”

The study found that HELOC and closed-end interest rates, yields and weighted-average coupons have all “tumbled as credit yields fell furthest.”

Price Compression

“Three years ago, I saw price compression at 100.50 to 101.50,” HELN Director Ralph Armenta said in a statement. “Today, there is such a voracious appetite that I am seeing trades at the 105-106 handle, a six-year life for both CES and HELOC, which are driving yield to around 8%. Time, patience, and investor demand have been kind to this asset.”

According to the HELN study, small financial institutions were responsible for a significant share of the growth in depository HELOC portfolios, while securitized loan performance improved, and internet searches for equity-sharing products outpaced queries for lending products.
RMBS issuance also continued to gain momentum, the report added.