iStock illustration

HELOCs Offered Bright Spot for Massachusetts’ Top Lenders

By Jay Ftizgerald
Special to Banker & Tradesman

Massachusetts banks, credit unions and mortgage companies all took major hits in residential lending in 2023 due to higher interest rates and the historically low number of homes for sale across the state.

But there were a few lending bright spots last year, such as a rise in home equity lines of credit, and early signs of overall lending improvements in 2024, according to local bankers.

There’s no mistaking last year was a tough one for residential lending in Massachusetts and across the nation, as residential loan volume fell in most categories, sometimes by as much as 50 percent or more according to data from The Warren Group, publisher of Banker & Tradesman.

“It was a challenging year on a number of fronts,” said Mike Sinclair, executive vice president of residential and consumer lending at Needham Bank. “It was a very difficult environment for everyone.”

A Year of Downward Trends

In the single-family mortgage category, Arlington-based Leader Bank was again ranked at the top among banks in Massachusetts, with $818.1 million in mortgage loans. But that was down by 25.6 percent, from $1.1 billion in single-family lending volume, in 2022, according to data from The Warren Group.

Hyannis-based Cape Cod Five ranked No. 2 in single-family mortgage lending, with $365 million in loans last year, but that was down by 30 percent, from $526.1 million in 2022. Among banks, Hanover-based Rockland Trust came in third with $316.9 million in single-family loans, down 20 percent from 2022.

For credit unions, top-ranked, Marlborough-based DCU posted $96.3 million in single-family mortgages in 2023, down 12.5 percent compared to 2022, according to The Warren Group’s data. For mortgage companies, top-ranked Guaranted Rate generated $1 billion in single-family mortgages, down a 27.8 percent compared to 2022.

Similar lending trends dominated condominium lending across the state last year.

Even non-purchase residential loan products – typically, refinances, home equity loans and home equity lines of credit – saw combined downward trendlines in 2023.

At $1.8 billion in non-purchase lending, Citizens ranked first among banks in Massachusetts in 2023, but that was down 35.7 percent compared to 2022.

Among locally based banks, Boston’s Eastern Bank ranked fourth in non-purchase loans in 2023, at $614 million, but that was down by 37.6 percent compared to 2022.

For credit unions, DCU ranked No. 1 with $205.4 million in non-purchase landing in 2023, down 54 percent from 2022.

For mortgage companies, Rocket Mortgage ranked first with $650 million, down a whopping 61.7 percent in 2022, according to data.

Few Eager Sellers

The culprits for the declines in all general lending categories: higher interest rates and super-low inventories of homes for sale in Massachusetts, banker say.

The higher rates, which hovered around 7 percent on average last year, made home purchases more expensive and knocked a few potential buyers out of the market, though overall demand remained strong.

But what really hurt the market was potential sellers growing highly reluctant to sell if it meant giving up their historically low mortgage rates on their current homes for higher rates on newly purchased homes.

The net result: a plunge in the number of homes for sale to record lows in 2023.

“People with a rate of 3 percent are not looking to buy at higher rates. It’s that simple,” said Bert Talerman, president of Cape Cod Five, which saw its mortgage volume fall by “just under half” compared to 2022. “Our mortgage volume was down significantly.”

Patrick Sylvester, senior vice president of capital markets at Leader Bank, agreed that lack of homes for sale was the lending killjoy of 2023.

“Inventory was the real challenge in 2023,” he said. “We continued to see strong demand from buyers. Our pre-approvals are up. But [potential sellers] are sitting on their super-low rates. There’s a hell of a lot of people on the sidelines.”

Meanwhile, the refinancing market has all but dried up for most banks. Those with low rates from a few years ago have little to no incentive to refinance.

HELOCs a Bright Spot

But home equity lines of credit (HELOCs), which allow homeowners to tap into the equity of their homes without giving up their lower mortgage rates, offered a bright spot for local lenders. HELOC rates are mostly running at prime minus a half point, or about 8 percent as February came to a close.

At Cape Cod Five, HELOC business was up about 27 percent last year, said Talerman. At Leader Bank, HELOC business has risen about 20 to 30 percent over the past year, said Sylvester.

“It’s been solid,” said Talerman of HELOC activity at Cape Cod Five. “People can keep their old rates but still access their [home] equity.”

“It’s really been booming,” Sylvester said of HELOC activity. “It’s a good way to fund renovations or pay down other debts.”

Both Talerman and Sylvester said their lines-of-credit business have expanded without heavy marketing.

“It’s a product you don’t really need to market because people already know about it,” said Talerman.

“No formal ad campaigns, just word of mouth,” Sylvester said.

Joe Riley, executive vice president of retail banking at Salem Five Bank, said HELOC activity became “explosive” about a year ago, as rates started their relentless rise.

Applications for HELOC products have roughly doubled and actual use of the product has increased about 10 percent, he said. 

“At 8 percent [interest rate], it’s a lot better than rates for other forms of debt,” he said of lines of credit.

Needham Bank’s Sinclair said HELOC business is going OK at his institution, taking up a larger share of the bank’s overall residential lending portfolio.

But Needham Bank’s most popular residential lending product is a 40-year mortgage with adjustable rates every five years.

“You get lower rates with this,” he said. “There’s quite a lot of appeal for this product.”

As for 2024, most local bankers interviewed for this story are cautiously optimistic that overall lending will pick up, especially if the Fed lowers interest rates later this year.

“We’re looking for rates coming down in the second half of 2024,” said Sinclair. “That might spur more mortgage activity.”

Leader Bank’s Sylvester said the Fed may have delayed lowering short-term rates due to higher-than-expected inflation so far this year. But he said the market has already priced in probable rates cuts, easing mortgage prices a bit heading into the post-winter home-selling season.

For over 150 years, The Warren Group has been the most trusted and reliable source in New England for real estate property data. The company maintains the most comprehensive property database today due to its long-standing relationships with town assessors, clerks and county registries as well as its extensive daily collection of transaction records in the field. Transactional data is collected daily, verified, matched to the appropriate property record and posted weekly; it includes sales transfers, mortgages and refinances.  

The data in this report represents purchase and non-purchase loans made by banks, credit unions and mortgage companies in Massachusetts in 2023. Category breakdowns include purchase mortgages for single-family, multifamily (two-family and three-family combined), condominium and commercial properties, as well as non-purchase residential loans (includes refinances and HELOCs). Residential and commercial data are not combined in any reports. The commercial data in these reports caps all loans at $1 billion. Each category ranks the top 10 lenders by both dollar volume and number of loans.  

For more information, please contact The Warren Group’s customer service department at customerservice@thewarrengroup.com or 617-896-5367.