Home equity line of credit (HELOC) are on the decline, according to a report from J.D. Power. The J.D. Power 2019 U.S. Home Equity Line of Credit Satisfaction Study found that HELOC originations have been on the downward slope due to rising interest rates, new tax laws and growing competition, as customers search for alternatives.
“HELOC providers have a privileged position in the consumer lending space by virtue of the relationships they already have with home loan customers, but they cannot afford to rely on those relationships alone to generate new originations,” said John Cabell, Global Business Intelligence Practice Leader at J.D. Power. “Customers are being wooed by increasingly sophisticated competitors. Right now, HELOC providers are struggling to deliver digital experiences that are in line with customer expectations. That is becoming a major drag on future business as new, digital-native competitors enter the marketplace.”
One of the factors J.D. power cites as a threat to HELOCs are HELOC providers low online presence. J.D. Power’s study found that satisfaction is lowest among HELOC customers who gather information entirely online.
Additionally, alternative products such as personal loans are on the rise, especially among younger (under 40) customers. The biggest concerns for those shopping for alternatives include variable interest rates, overextending debt and higher payment after draw period.
The study also found that for long-term HELOC customers, satisfaction is particularly low. Long-term customers are generally less satisfied than their newer peers, and on average, these long-term customers are less knowledgeable about the product.
“There are some very obvious areas where HELOC providers could make tremendous improvement by taking certain steps,” Cabell said. “One of the easiest is alleviating customer concerns during the shopping process by publishing clear information on their website about interest rates and payment schedules.”
The complete study from J.D. Power can be found here.