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The Home Equity Paradox! | Epic Research

Written by Jim Stewart | Jul 12, 2025, 4:00:00 AM

Three Things We’re Hearing

  • The Home Equity paradox!
  • Cash Back card surge
  • Direct mail still dominant

A four-minute read

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The Home Equity Paradox: Record Wealth, Shrinking Lending

  • Since the 2008–09 financial crisis, U.S. homeowners have built unprecedented housing wealth
  • Total home equity has more than tripled, rising from ~$10 trillion in 2012 to $34.5 trillion in 2025
  • In 2000, average household equity was about 125% of median income and by 2025, it’s nearly 300%
  • But while equity has surged, home equity lending has not as outstanding balances have hovered near $300 billion, down ~40% from mid-2000s levels
  • Why the Disconnect?
  • Regulation – post-crisis reforms (Dodd-Frank, Basel III) made second-lien lending more expensive and capital-intensive
  • Shifting Borrower Behavior – in the 2010s, ultra-low mortgage rates led many to refinance and cash out equity rather than open a HELOC
  • Operational Retreat – major lenders like Wells Fargo and Chase pulled back from home equity, and today, Discover, Citizens, and a few fintechs dominate a quiet market
  • Interest Rate Volatility – Since 2022, rising rates made HELOCs more expensive; and despite rate spread compression between HELOCs and personal loans, HELOCs remain ~300bp cheaper than personal loans and have much higher line sizes
  • Meanwhile, consumer demand is coming back — despite the pullback in home equity loan originations, demand is rising — search volume, online applications, and consumer survey data all show growing interest
  • Home Equity marketing is up 90%+ YTD; however, prior to that, home equity marketing was down, especially in the dominant direct mail channel
  • Creative quality has been flat with few lenders showing consumers why home equity borrowing is cheaper than other options
  • Despite the spike in 2025 marketing, home equity lending is at historically low levels, leaving a big opportunity for lenders!!!
  • Average tappable equity per household now exceeds $245,000
  • For borrowers locked into 3% mortgages, a HELOC is often the best path to liquidity
  • Citizens and fintechs like Figure are responding with digital offers, yet most banks have left the field wide open
  • There is $10–$12 trillion in tappable equity in U.S. homes, yet banks are lending as if it’s 2011 – with credit card APRs topping 20%, the case for smart home equity lending has never been stronger

Cash Back Card Surge

  • Cash back has been the predominant credit card rewards type in recent years, accounting for roughly half of all card mailings
  • Discover and Capital One (now the same company) have been the dominant mailers of cash back offers in the past 12 months, followed by Bank of America and Citi
  • Typical features of cash back cards include sign on bonuses, 0% APR, and no annual fee
  • What determines the “best card” might depend on an individual’s spending patterns
  • Best for ultra-simple rewards: Citi Double Cash and Wells Fargo Active Cash offer flat-rate cash back on all purchases with minimal hassle
  • Category boosters: Chase Freedom Unlimited adds extra returns on travel, dining, and drugstores
  • Big grocery earners: Blue Cash Preferred shines with 6% at U.S. supermarkets (capped), ideal for families
  • Consumers have shown a preference for cash back cards, with many of them preferring their primary bank as issuer
  • Google trends show consumer interest in cash back cards has nearly doubled since 2018
  • Given consumer interest in cash back, along with their preference for dealing with their primary bank, regional banks are well positioned to grow their card portfolios with a competitive cash back product

Direct Mail Still Dominant

  • As noted above, YTD 2025, Home Equity marketing has shown the largest resurgence of the consumer finance products that we track
  • Across all financial products, most large marketers use direct mail as their primary new customer acquisition channel
  • Personal loan relies most heavily on mail
  • While national television is used by some banking product marketers to augment other channels
  • Amex Platinum refresh: American Express plans its “largest investment ever” in revamping both personal and business Platinum Cards in fall 2025 — including redesigned physical cards, expanded Centurion lounge access (adding Newark, Salt Lake City, Tokyo), enhanced dining perks, and likely higher annual fees
  • Chase Sapphire Reserve overhaul: Effective June 23, 2025, annual fee rises from $550 to $795 with benefits including new 8× travel and 4× flight/hotel earn rates, Points Boost redemption (up to 2¢/pt), richer lifestyle credits, sleeker design — and a business version launch
  • A survey of Gen Z consumers (those born between the mid-90s and early 2010s) reveals that rewards or discounts as well as higher credit limits are the dominant reasons for them to choose a credit card

Thank you for reading.

Jim Stewart
www.epicresearch.net

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