"Numbers bring a rise in home equity loans; Values rising, rates low; bankers say earlier excesses won’t be repeated" by Deirdre Fernandes | Globe Staff June 30, 2014
Borrowers once again are using their homes as a quick source of cash to pay for kitchen renovations, college educations, and cars — and even to gain a competitive edge when making offers on a new house.
An improving economy, rising home values, and low interest rates have spurred a resurgence in home equity borrowing in Massachusetts and throughout the country. Banks are again promoting these loans — which all but dried up after real estate values collapsed several years ago — and consumers, sitting on appreciating assets, are again seeking them.
Josh Robbins and his wife took out a home equity line of credit a few weeks ago at Eastern Bank. The value of the couple’s Norwood home, which they bought in 2012, has increased by tens of thousands of dollars, allowing them to borrow against the equity to help pay off Robbins’ law school loans. The student loans carry about an 8 percent interest rate, double the rate Robbins will pay on the home equity line.
Related: Law Degree
A good investment?
“I have a number of small student loans; some of them are a killer,” said Robbins, 30. “We’re thinking of starting a family. We wanted to knock off some of my debt before we started having to save for their college.”
Local banks say home equity borrowing has jumped as much as 40 percent from a year ago as customers, in addition to paying off debts that carry higher interest rates, take on home improvements that were put off during the last recession, discharge costly medical bills, and help their children buy homes.
Yeah, the whole world is wonderful and back to the way it was before all the $windling Wall Street madne$$ -- or so $ayeth the banker's mouthpiece, apologist, and defender.
One customer, said Jane Lundquist, executive vice president at Rockland Trust Bank, tapped the equity from his longtime home to make a cash offer on a new one, an advantage in today’s hypercompetitive housing market.
He will pay off the home equity loan when he sells his old house.
Home equity rates are averaging 4.5 percent, but customers with good credit and significant equity can find rates under 3 percent, according to bank officials and analysts.
Typically, home equity loans carry lower rates than other loans because they are secured by the property, but they are particularly low today because they are tied to the Federal Reserve’s benchmark short-term loan rate, which policy makers have held near zero since 2008.
We need to get untied from that as fast as possible.
The last time the market experienced the combination of low rates and rising values it led to disaster.
During the housing boom of a decade ago, many homeowners cashed out equity almost as fast as values rose, using their homes, as economists put it, like ATMs.
They were encouraged to do it by none other than the government and Federal Reserve. Globe forget that?
Related: Housing debt still traps 10 million Americans
When values began to fall, they were left with more debt than their homes were worth, contributing to the foreclosure crisis, the overall financial crisis, and ultimately the nation’s worst recession in 70 years.
No mention of the fraudulent seizure of homes either, all so banks could balance their bottom lines with real assets and not the mortgage-backed securities crap they sold everyone.
Few bankers and analysts expect the home equity market to return to those days of irresponsible borrowing and lending, but as attractive as low rates and ready cash may seem, homeowners need to be cautious in taking out home equity loans, said Polyana da Costa, a senior mortgage analyst with Bankrate.com, a consumer finance website.
And why should we believe those lying, $elf-$erving $cum?
Many of the loans have floating interest rates that will begin to rise as the economy improves and the Federal Reserve raises short-term rates....
You mean, like the student loans going up?
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