Home Equity Lending Market Outlook: Strong Growth Expected Through 2026
The home equity lending market is positioned for substantial growth through 2026, driven by favorable conditions that have made these products increasingly attractive to homeowners across the United States. According to a Mortgage Bankers Association 2025 Home Equity Lending Study, the momentum built in 2024 is holding steady and is expected to continue into the coming year.
Robust Growth in 2024 Set the Stage
Home equity origination activity was impressive in 2024, with total combined HELOC and home equity loan debt growing 10.3% year-over-year. Total originations also increased by 7.2%, reflecting strong consumer demand for these products. This growth trajectory appears sustainable, with industry participants projecting even stronger performance ahead.
"With close to $35 trillion of homeowner equity in residential real estate and many homeowners locked into low-rate first mortgages, HELOCs and home equity loans have become the product of choice for many homeowners," noted Marina Walsh, MBA's vice president of industry analysis.
Favorable Market Conditions Drive Demand
Several factors are converging to create an ideal environment for home equity lending. Many homeowners are reluctant to refinance their existing mortgages due to current interest rates, making home equity products an attractive alternative for accessing cash. This dynamic has fundamentally shifted how consumers approach their home financing needs.
Looking ahead, industry projections are optimistic. Outstanding HELOC debt is expected to increase 9.8% in 2025, while home equity loans are anticipated to rise 6.6%. The positive outlook extends into 2026, with predicted increases of 9.5% for HELOCs and 4.1% for home equity loans.
Evolving Consumer Usage Patterns
The reasons homeowners are tapping their equity have evolved significantly. While home renovations dominated in 2022 at nearly two-thirds of all loans, this dropped to 46% in 2024. Instead, debt consolidation and bill payment have become increasingly popular, rising from 25% in 2022 to 39% in 2024.
Industry Challenges Remain
Despite the positive outlook, home equity lenders face operational challenges. According to Walsh, only 50% of current home equity applications are closing, with average processing times of 39 days. Additionally, HELOC utilization rates have declined to 34% in 2024, down from 46% in 2018, suggesting borrowers may be cautious about accessing their available credit.
Rising production costs also present challenges, with the average cost for lenders to produce a HELOC or home equity loan exceeding $4,500 in 2024—14% higher than 2020 levels.
Innovation in Equity Access
As the market continues to evolve, innovative approaches to accessing home equity are emerging beyond traditional HELOCs and loans. Home Equity Investments (HEI), also known as shared equity agreements, represent a fundamentally different approach where homeowners receive a lump-sum payment in exchange for sharing a percentage of their home's future appreciation. Unlike traditional loans, HEIs carry no monthly payments, interest rates, or debt obligations—homeowners only repay when they sell, refinance, or reach the end of the agreement term.
There is increasing investor interest in this type of financing evidenced by the growth in securitizations of shared equity products. Even more innovative are emerging hybrid products that combine traditional second-lien features with shared equity components, offering homeowners greater flexibility while preserving their favorable first mortgage terms. These creative structures demonstrate how the industry is responding to the $25-30 trillion in untapped home equity, providing homeowners with sophisticated alternatives to unlock their property's value.
New Vista Solutions Offers Cost-Saving Products
New Vista specializes in settlement solutions that serve the home equity market. Our alternative valuation and warranted instant title products are designed to help home equity lenders save time and money. We have a full suite of products and services that will cut costs and shorten the time to close your home equity loans. For more information, contact us at info@newvistasolutions or call 866.721.9295.