At the end of February, the amount of tappable, or lendable, equity available to Americans soared to $5.4 trillion, the highest on record and 10 percent above the pre-recession peak in 2005, according to the latest Mortgage Monitor Report from Black Knight, Inc.
Black Knight defines tappable equity as the total amount of equity a homeowner with a mortgage has available to borrow against before reaching a maximum loan-to-value ratio of 80 percent.
“As home prices continued their upward trajectory at the national level, the amount of tappable equity available to homeowners with mortgages continued to rise as well,” Black Knight Executive Vice President Ben Graboske said in a release. “Tappable equity rose by $735 billion over the course of 2017, the largest calendar year increase by dollar value on record.”
According to Black Knight, an estimated $262 billion in tappable equity was withdrawn in 2017 via cash-out refinances and home equity lines of credit (HELOCs). During last year’s fourth quarter, Americans withdrew less than 1.25 percent of all tappable equity available in Q4 2017 – a four-year low. Of that total, 55 percent was tapped via HELOCs.
“At the start of 2018, some 55 percent of all tappable equity was held by borrowers with first-lien interest rates below the going 30-year rate. Following the nearly 50 basis points rise in interest rates we’ve seen since the start of the year, that share has ballooned to 75 percent,” Graboske added. “While rising rates tend to dampen utilization of equity in general, the market is poised for a strong shift toward HELOCs, as they allow borrowers to take advantage of growing equity while holding on to historically low first-lien interest rates.”