Colorado homeowners who are tapping their home equity this year aren’t holding back, borrowing about 50% more on average than consumers in other states.
“People are chomping at the bit to get home equity loans,” said Jacob Channel, a senior economist with LendingTree, whichon its online lending platform. Nowhere are they chomping more than in Colorado.
Home equity loans, because they come behind mortgages for repayment after a default, carry a higher risk for lenders and a higher interest rate to compensate. And that rate can vary based on location, more so than with mortgages. LendingTree found that the home equity loans issued this year had an average interest rate of 8.47% in Alaska, while in Maryland, the lowest-cost state, the average was 4.55%.
The credit bureau TransUnion measured a 41% jump in the number of HELOCs issued nationally in the second quarter — 291,736 vs. 207,422 a year earlier.Mark Vitner, a senior economist with the Wells Fargo Economics Group, suspects that the renewed interest in home equity extraction could reflect the financial stress some households are coming under with inflation running at 40-year highs.
Another contributor is that there is plenty of equity to tap. Home buying activity surged when the Federal Reserve cut rates to rock bottom in 2020 to protect the economy from a pandemic shock. But that set off a home buying frenzy. From March 2020 to May 2022, metro DenverIn the first quarter, U.S. homeowners gained ancompared to the prior year, according to real estate research firm CoreLogic.
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