Data from Intercontinental Exchange (ICE) reveals that US homeowners tapped into their home equity during the first quarter at the highest level for that period since 2021.

This surge was primarily driven by subordinate lien loans, which reached their highest first-quarter volume in nearly two decades.

The total amount of home equity extracted in the first quarter rose by an estimated 2% year-over-year to approximately $47 billion.

More than half, or 54%, of this equity was accessed through subordinate liens.

Around 248,000 borrowers utilized about $25 billion in equity during the quarter via these loans or Home Equity Lines of Credit (HELOCs).

Concurrently, an additional 234,000 homeowners extracted roughly $22 billion through cash-out refinances.

Key Market Dynamics

Andy Walden, Vice President of Enterprise Research at ICE, noted that the "lock-in effect" continues to shape the current market landscape.

He explained that millions of homeowners hold first mortgages with interest rates significantly below current market levels.

This situation makes subordinate liens and HELOCs an attractive option for accessing equity without sacrificing their existing low-rate loans.

Data shows that nearly two-thirds of subordinate lien originations in the first quarter came from borrowers who secured their first mortgage between 2020 and 2022 and chose to retain those low rates.

Currently, about 3.9 million borrowers from that period have added a subordinate lien alongside their original mortgage.

Product Appeal and Affordability

Beyond the motivation to preserve low rates, increased product attractiveness has also fueled demand.

The report indicates the average rate for a subordinate lien HELOC fell to 6.6% in March, marking the lowest level since late 2022.

At this rate, a borrower accessing $50,000 in home equity would have a monthly payment of approximately $275, representing a significant reduction in payment burden compared to early 2024.

Although mortgage rates have risen by about 50 basis points since February, partially offsetting affordability gains from earlier in the year, homebuyer purchasing power remains roughly 3% higher than a year ago.

Furthermore, home price growth has become more widespread, with nearly 70% of major markets experiencing year-over-year price increases in May—the highest proportion since July of last year.

Bob Hart, President of ICE Mortgage Technology, commented that as refinance opportunities have become more limited, home equity products are playing an increasingly important role in helping homeowners access liquidity.