New numbers charting the astronomical growth in HELOC use – along with an equally unprecedented growth in household debt – are highlighting the need for brokers to educate clients even as those mortgage brokers gain greater access to the products, says one agent.
“For the right reasons and used correctly, HELOCs can help the client,” Mike Hamdan, an agent with Dominion Lending Centres – Eagle Group Mortgages, told MortgageBrokerNews.ca,” but there are downsides, and this report highlights the need for the broker to educate the client about those potential negatives.”
That report – the Bank of Canada’s Household Finances and Financial Stability Review – charts the growing use of home equity lines of credit as housing prices continued their climb and interest rates hovered near historic lows.
While HELOCs accounted for 11 per cent of non-mortgage credit in 1995, by the end of 2011 they represented almost 50 per cent of that segment. They also represent a whopping $215 billion industry, according to a CAAMP report last year – the first to track that segment of the market largely closed to brokers.
The government’s move to withdraw its backing of those lines of credit have done little to cool their growth, with lenders, both in and outside the broker channel, continuing to bolster their offerings.
Brokers, who historically have been shut out of that market, are finding more and more of their lenders prepared to offer it as they move to grow their own use of collateral charges.
ING is among the most recent, with plans to expand HELOCs to all of its broker partners this year.
That greater access carries an increased obligation to ensure HELOCs represent a good fit for clients, who may ultimately find themselves carrying debt loads well beyond their capacity, said Hamdan, a Toronto agent.