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For US banks, home equity loans slide while credit quality improves in Q3

At the end of September, the U.S. bank and thrift industry reported $427.55 billion in home equity lines of credit and junior liens, a 2.0% drop from the second quarter and an 8.6% decline from the third quarter of 2017.

Overall credit quality has continued to improve, however. The percentage of home equity lines of credit that were delinquent or in nonaccrual status fell to 2.98% as of Sept. 30, compared to 3.01% at the end of June and 3.12% at the end of September 2017. Meanwhile, the delinquency rate for closed-end junior liens fell to 3.77% as of Sept. 30 from 4.13% at June 30 and 4.29% a year earlier.

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U.S. banks and thrifts have been steadily raising interest rates on home equity lines of credit as the Federal Reserve continues hiking rates. Since the beginning of December 2017, the Federal Open Market Committee has raised its target for the federal funds rate by 125 basis points, including a new increase announced Dec. 19

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Bank of America Corp. leads the industry with $51.05 billion in home equity loans and lines of credit, although this was a $2.30 billion drop quarter over quarter and an $8.45 billion drop year over year.

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