The low hanging fruit in lending has seemingly dried up. While the Fed continues to raise rates, we have seen all loan rates increase along with them.
Just six months ago you could find auto loans below 3%, now they are closer to 5% and above. Let’s not forget about mortgages. Those have gone from bad to worse. Today’s average mortgage rate is 6.52%.
But there are options! Within an upwardly moving rate environment, a home equity loan can be a great solution to a consumer.
Today’s homeowner is now sitting on the largest amount of equity in history. CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase to an average of over $300,000!
The $300,000 may be subject to a decline as we watch home prices adjust to the new, slower level of sales resulting from the mortgage rate increases.
What’s a marketer to do?
Now is the time to leverage the home equity loan (or line of credit) as a tool to help your consumers with alternative loan choices.
Promote the following benefits in your marketing communication:
1) Pay down higher balance credit cards. The average credit card rate is now almost 20% while the average home equity loan is 7.75% and the average HELOC is 7.30%. If someone is carrying a 20% credit card rate along with a large bill coming out of the holidays, the line of credit could reduce their monthly outflows significantly.
2) As a source of funds for an RV or Boat loan. RVs and other items often carry a much higher interest rate than a traditional auto. Consider a home equity option as an alternative, especially as we move into the spring and summer months.
How to promote
You can promote home equity in two distinct manners:
• Targeted Offers – Use a predictive list to help you identify the highest equity households within your market area. Send a targeted letter along with projected savings seen when converting higher rate loans over to an equity loan.
• Broadscale Marketing – Don’t be afraid to push out messaging to your account holders through email, web banners and other digital messaging.
• In-branch Merchandising – Signage and other POS will help you drive awareness to consumers.
One final note on Home Equity Loans. Please avoid using the term HELOC in your headlines and marketing messages. Most people don’t know what a HELOC means. They might if you added “Home Equity Line of Credit” next to it, but not by itself.
There are loans out there, you’ll just have to look a little harder for them.
Thanks for joining me today!