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Home Equity Lending Trends & Tactics: How to Grow Your HELOC Portfolio

Try these four strategies to overcome the primary factors suppressing HELOC utilization.

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Article Highlights

  • Multiple factors are holding down HELOC utilization percents, including weak acquisition and utilization efforts, home improvement delays and more.
  • The consumer buying process can guide your HELOC marketing strategy.
  • Data analysis and segmentation can help strengthen acquisition marketing and optimize utilization marketing.
  • Value-added content can support your home equity lending marketing by helping people understand the what, why and how of HELOCs.

Home equity lending is in a strong position heading into 2022. The stay-at-home boom in 2020 spurred high consumer interest in home renovations. In addition, many homeowners have already refinanced their mortgage and are looking for alternative borrowing options so they can keep their low mortgage rates. This is an ideal scenario for home equity lending products.

Unfortunately, other factors are at play, and banks are seeing their HELOC portfolios less utilized than they’d like. In fact, some banks are seeing 30% of their HELOC portfolio sitting quietly with a $0 balance. Which means they’re not making money. But we have strategies to help push past those headwinds and grow your portfolio to where it should be.

Let’s start with a more detailed look at the top trends currently challenging HELOC utilization.

Negative HELOC Trends

  1. Reduced acquisition efforts. HELOC balances tend to build in the first six to 12 months after opening, and then plateau or begin dropping. If you don’t have new accounts opening as existing accounts become less active, overall utilization in your portfolio drops.
  2. Weak utilization efforts. Even with a steady stream of new HELOC accounts, total utilization will suffer if existing customers don’t continue drawing from their line because you aren’t reminding them why and how to use it.
  3. Pricing and incentives. In some cases, customers are being encouraged to open accounts they may not need right now — for instance, banks may promote a HELOC as a safety net for emergency use with no annual fee. In other cases, customers are being incentivized to apply for higher lines than they would normally get — for instance, banks may offer a lower interest rate for a larger line. With customers opening accounts for possible future emergencies or taking more line than they’re likely to use, the number of $0 balance accounts increases.
  4. Cash in market. Consumers often take out a HELOC as a financial safety net. So, if they’re feeling “cash flush,” they’re less likely to dip into their line.
  5. Home improvement delays. On the other hand, some customers would be happy to use their line for a planned renovation project. But with supplies and contractors in short supply, many home improvement projects are on hold, so the HELOC sits idle.

The good news is that the four strategies below can help you overcome these negative forces.

Use the Consumer Buying Process to Guide HELOC Strategy

Building your marketing strategy around the consumer buying process helps address both acquisition and utilization needs. It gives you a sound guideline for creating appropriate messaging to encourage desired action at each stage.

Consumer Buying Process

Here’s a quick overview of each stage and some ideas on how to connect the process to home equity lending strategies.

1: Problem recognition

At this stage, the focus is on life situations, not a specific financial product. Your marketing strategy involves helping homeowners become aware of problems — like the need for a new roof — and showing how you can help, for instance with home equity lending products to finance the roof.

2: Information search

Once aware of a problem, the consumer looks for information on solving it. Your marketing strategy is to teach them how to buy by educating them on different solutions — for instance, a HELOC, credit card and personal loan. You should also proactively address potential questions and concerns, such as, “Is there an annual fee?” Or, “How do I compare rates and payments?”

3: Evaluation of alternatives

When the consumer has chosen a product, they may then move on to comparing different providers, such as a traditional bank or credit union, or a fintech option. Your marketing should emphasize differentiators and benefits of your home equity lending in general, your HELOC product in particular and your financial institution.

4: Purchase decision

Finally, the consumer is ready to make a decision. Your marketing should provide the final reasons (including offers and benefits) for why they should pick you and your product. Then, you must make it simple and friction-free to move forward.

5: Post-purchase behavior

At this stage, your marketing should keep your financial institution — and the customer’s HELOC — top of mind, with messaging focused on utilization and helping customers make the most of their line.

Strengthen HELOC Acquisition with Data

Data analysis and segmentation can identify prospects who are — and aren’t — good candidates for acquisition campaigns, as well as inform your incentive decisions. Incorporating personalized data points can also make your marketing highly relevant to each individual.

Optimize HELOC Utilization with Data

Data analysis and segmentation can likewise identify which HELOC customers are and aren’t  good candidates for utilization campaigns. For instance, you can consider likelihood to use the line without encouragement or potential profitability based on expected return on marketing investment.

Use Value-Added Content to Support HELOC Marketing

Content that informs and educates can support your home equity lending marketing strategies at every stage. For instance, your acquisition marketing efforts can include content that builds awareness and understanding of home equity, home equity lending products and how they can help consumers achieve financial goals.

For customers already in your HELOC portfolio, you can use content to continue teaching them how and why to use their line. You can also make sure they’re informed about the HELOC stages, so they fully understand draw period and repayment period, and know their options as end of draw approaches.

Build Profits from Home Equity Lending

Trying these strategies can help boost your HELOC utilization numbers so you’re getting all the value out of it that you can. And that can not only improve home equity lending profitability, but can also help build, deepen and strengthen your customer relationships for the long term.

If you need an objective overview of your HELOC portfolio, strategic recommendations, proprietary data analytics or content developed by financial journalists, CCG is here to help. Our financial marketing experts have more than 40 years of experience guiding financial institutions to improved revenue and driving customer action with a comprehensive array of services and solutions. To see how we can help you meet your HELOC objectives, schedule a free consultation or call us at 303.986.3000.

Greg Sultan

Author Greg Sultan

Greg has more than 30 years of experience working with many of the country’s top 100 financial institutions on activation, acquisition, cross-sell and onboarding campaigns. His expertise also includes developing database marketing programs.

More posts by Greg Sultan

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