Home Equity Balances vs. Prime Interest Rate and U.S. Median Home Prices

Source: 2023 Alkami Telemetry Data is sourced from a panel of more than 20 financial institutions with a range of asset sizes from $500M to $15B. The data panel represents the financial behaviors of 2.1 million account holders.

What we’re seeing: Rising home values have left Americans wealthier on paper, but most are locked into mortgages with historically low interest rates that make cash-out refinances inadvisable for tapping into that equity.  The prospect of a higher interest rate on a new mortgage also makes it unattractive to move, so those who need additional space or an update to their living situation may find remodeling and renovating more attractive than buying a new home.

One solution is home equity loans and lines of credit, and consumers are taking advantage. Despite being costlier due to higher interest rates, our data shows that the average balance for home equity loans and lines increased by 36 percent from July 2020 to July 2023.

Takeaway & Call to action for FIs: Financial institutions have a two-pronged opportunity with home equity lines of credit and home equity loans in the current environment.  Account holders with loan products tend to be “sticky,” making the transition to another institution inconvenient. Target mortgage account holders for a line or loan that may be a solution for them, as well as current line holders to increase utilization.

Interested in learning how customer insights can empower your financial institution to grow your business?