Home Equity Lending of Credit (HELOC) is back in the spotlight. After more than a decade of muted demand, homeowners are once again turning to their equity at record levels. With borrowing costs still elevated, credit card debt surging, and home values continuing to rise, home equity lines of credit (HELOCs) have re-emerged as one of the most attractive lending products in the market today.
For lenders, this resurgence represents both an opportunity and a challenge. Demand is climbing quickly, but expectations for speed, convenience, and transparency are higher than ever. Financial institutions that can modernize their processes and orchestrate smarter decisions will be well-positioned to capture market share.
HELOC Lending Hits a 17-Year High
The data is clear: homeowners are leaning on their equity as their wallets begin to feel tight. In the first quarter of 2025, HELOC draws reached nearly $25 billion, the highest level in 17 years. That marks a 22% year-over-year growth, underscoring the appeal of tapping into home equity even in a higher-rate environment.
Several forces are driving this resurgence, including:
- Liquidity needs: 89% of borrowers draw on their HELOC within six months of origination
- Healthy equity positions: the average borrower retains a 20% equity buffer after their first draw
- Regional growth: rising property values in markets like Texas, Florida, and the Pacific Northwest are fueling activity through increased equity
- Institutional momentum: for mid-tier banks and credit unions, HELOC growth is now a key performance driver
Credit Card Consolidation Fuels HELOC Popularity
One of the biggest catalysts for HELOC demand is credit card debt consolidation. With card balances surpassing $1.18 trillion and average APRs climbing above 20%, consumers are looking for relief. A HELOC, at an average rate of 8.26%, offers a compelling alternative.
While financial advisors caution borrowers to weigh the risks, particularly the collateralization of their home, the appeal of dramatically reducing interest expense has proven difficult to ignore.
- Over 40% of new HELOC applications cite debt consolidation as the primary purpose
- Balance transfers from credit cards to HELOCs hit record levels in early 2025
- Banks are proactively targeting these borrowers with pre-approved HELOC offers
- Lenders are bundling financial wellness tools with HELOC products to promote responsible use
Home Equity Lines of Credit Return to the Mainstream
After fading from prominence following the 2008 financial crisis, HELOCs are now a mainstream financing tool once again. For many homeowners locked into historically low first mortgage rates, a HELOC provides flexibility without requiring them to refinance into a higher-rate product. By 2026, Freddie Mac estimates HELOC origination volume could exceed $200 billion annually, effectively doubling current levels.
Borrowers are skewing older than historical norms, with the 40-60 age range leading adoption. In addition, Gen X and Millennials alike are using HELOCs to advance financial and lifestyle goals such as renovations, tuition support and student loan repayment, or second homes. Due to flexible repayment structures, HELOCs are well positioned to help individuals achieve these goals while acting as a useful tool in recession-hedging strategies.
This growth not only supports household financial needs but also represents a vital revenue stream for lenders at a time when traditional mortgage originations and refinancing are lagging.
Digital Innovation Redefines the HELOC Experience
A defining theme of the 2025 HELOC market is the push toward digital-first, data-driven lending. Consumers expect credit experiences to mirror the ease of applying for a credit card or personal loan, and lenders are stepping up with major technology investments.
Many lenders now skip in-person appraisals, leveraging automated valuation models to dramatically cut approval times. Prequalification decisions are delivered rapidly via data-driven decisioning, sometimes in less than 5 minutes for pre-screened customers.
A key benefit of these advances? Abandonment rates for HELOC applications dropped 15% in 2025, reflecting smoother, customer-focused experiences, helping banks stay competitive in a crowded marketplace while improving borrower satisfaction.
Low Delinquencies Signal Responsible Borrowing
Despite economic uncertainty, HELOC delinquency rates remain historically low. According to OCC and ICE data, the 30+- day delinquency rate is just 1.1% – far below that of unsecured debt.
Other positive signals include:
- Less than 2% of borrowers missed a payment in the last 12 months
- Most delinquencies are concentrated among sub-700 credit score borrowers
- Strong underwriting standards continue to dominate, with the majority of new HELOCs going to those with 720+ FICO scores
- Banks are proactively stress-testing their portfolios for potential slowdowns in 2026
The combination of cautious borrower and prudent lender practices is helping ensure HELOC growth remains successful over time.
How Zoot Supports Sustainable Growth in HELOC Lending
While market conditions are favorable, success in HELOC lending is not guaranteed. Institutions must balance speed with risk management, simplify borrower experiences, and maintain agility in a shifting regulatory and economic landscape.
Zoot helps lenders achieve these goals through prescreening, fraud orchestration, and data-driven automation.
Prescreen: Smarter Targeting, Faster Decisions
Prescreening empowers lenders to identify the right HELOC candidates before they apply. By leveraging data from multiple bureaus and providers with configurable decision rules, institutions can engage in a more efficient origination process and a better borrower experience.
- Focus marketing on qualified borrowers most likely to be approved
- Streamline the application process by offering pre-approved products
- Reduce credit risk by ensuring borrowers are financially prepared
- Adapt quickly as regulations and market conditions evolve
Fraud Orchestration: Real-Time Protection Across the Journey
As digital applications surge, fraud prevention becomes mission-critical. Zoot’s fraud orchestration platform enables lenders to implement a layered approach, ensuring lenders can process applications quickly without compromising security.
- Run real-time fraud checks across identity, credit, device, and behavioral data
- Configure decision rules tailored to HELOC workflows
- Leverage high quality data from an extensive partner network of fraud and data providers
- Reduce application abandonment through prefill technology that uses verified data to auto-populate forms
Zoot helps financial institutions rise to the challenge to make the most of new growth opportunities with configurable decisioning, seamless fraud orchestration, and powerful prescreening tools that streamline the lending journey from marketing to approval. As home equity lending accelerates, those who modernize their processes and orchestrate smarter decisions will lead the market.
Connect with our team today to learn how our solutions can help you streamline originations, reduce risk, and capture more growth in this fast-moving market.
