Debt consolidation jumps to 39% of home equity borrowing

Mortgage Bankers Association data show homeowners are shifting away from using home equity for renovations and toward paying off credit card and auto debt. The trend matters because it turns more unsecured balances into debt tied to the home, even as household debt and home equity borrowing both climb in 2026.

Why it matters: - Home equity is increasingly being used to manage existing debt instead of improve homes. - That shift converts unsecured credit card and auto balances into debt secured by the property. - The move can lower interest costs, but it raises the stakes if a borrower falls behind.

What happened: - Mortgage Bankers Association data for full-year 2024 show debt consolidation rose to 39% of home equity borrowing. - Renovation fell to 46% of home equity borrowing in 2024. - Renovation accounted for 65% of home equity borrowing in 2022, then 56% in 2023, before dropping to 46% in 2024. - Debt consolidation rose from 25% in 2022 to 33% in 2023 and 39% in 2024.

The details: - The Mortgage Bankers Association tracks why borrowers open home equity lines of credit and home equity loans. - The 2025 study reflects full-year 2024 data. - The crossover has not fully happened, but debt consolidation is closing the gap with renovation. - The average credit card carried an interest rate of 21% in early 2026, according to the Federal Reserve. - A home equity line often costs 7% to 8%, according to Bankrate's national lender survey. - Moving $30,000 of card balances onto a home equity product can materially reduce interest costs. - The tradeoff is that the home backs the debt if the borrower cannot pay. - A disciplined borrower can use lower-rate home equity borrowing as part of a repayment plan. - A borrower who consolidates debt and then runs the cards back up can end up with both balances and the house securing one of them. - Homeowners pulled an estimated $47 billion from their properties in the first quarter of 2026, the highest first-quarter figure since 2021, according to Intercontinental Exchange. - Outstanding home equity line balances reached $446 billion by early 2026, marking a 16th consecutive quarterly increase, according to the Federal Reserve Bank of New York. - Total household debt reached $18.8 trillion in the first quarter of 2026. - Credit card balances reached $1.25 trillion in the first quarter of 2026, up 63% from $770 billion in early 2021. - Non-housing debt, including credit cards, auto loans, and student loans, grew 56% over the past decade. - The average mortgaged homeowner held about $295,000 in equity at the end of 2025, with about $200,000 tappable while keeping a 20% stake in the home, according to Cotality. - Equity gains were strongest in the Northeast, including about $26,100 in New Jersey, $23,100 in Wyoming, and $20,300 in Connecticut.

Between the lines: - The same home equity product now serves two different financial pressures: home improvement and debt restructuring. - The data suggest household strain is rising even as home values have left many owners with substantial equity. - Some industry analysts view the growing share of debt-consolidation borrowing as a sign of increasing financial pressure. - Companies that work with homeowners, including Buys Houses, are seeing owners use equity for both renovation and debt management.

What's next: - The mix between renovation borrowing and debt consolidation will show whether homeowners keep using equity as a debt-management tool or shift back toward property improvements. - Owners weighing a home equity loan or line will need to judge whether the debt behind the borrowing is actually being reduced. - The key test is whether the home can safely carry a new lien without deepening the household's debt problem.

The bottom line: - Home equity is still a financial cushion, but more homeowners are using it to pay off old debt rather than invest in the house itself.