Hometap demand surges as rate rises boost equity interest

Hometap said demand for its home equity investments rose 40% from a year earlier, while weekly pre-qualifications increased after the latest US Federal Reserve rate rise.

The Boston-based financial technology group said weekly pre-qualifications for a Hometap investment climbed 20% in the three weeks after the Fed raised rates in September. September was its strongest month on record for pre-qualifications, with one homeowner now pre-qualifying every three minutes.

The figures point to growing interest in ways to tap housing wealth without refinancing a mortgage or taking on another monthly loan payment. Hometap's product gives homeowners cash upfront in exchange for a share of the home's future value, with settlement due at or before the end of a 10-year term.

The increase in demand comes as mortgage holders sit on record levels of home equity. Hometap cited ICE data showing USD $18 trillion in home equity and noted that higher borrowing costs have made traditional home equity loans more expensive for many households.

Average home equity loan rates are 8.77%, according to Hometap, citing Bankrate. That would equate to a monthly payment of about USD $630 on a USD $50,000 loan over 10 years.

That backdrop has helped companies offering alternatives to standard home equity loans and cash-out refinancing attract attention from borrowers looking to manage debt, fund repairs or cover household expenses. Hometap said more than half of its investments, or 55%, have been used to pay down debt, while 22% have gone toward home renovations.

In October, the group said it had passed USD $3 billion invested and had served 30,000 homeowners across 26 states. After updating its pricing in June, pre-qualifications in the following three months rose 28% from the same period a year earlier.

Jeffrey Glass, Chief Executive Officer and Co-Founder of Hometap, linked the increase to pressure on household finances and a search for more flexible funding options.

"A homeowner coming to us every three minutes tells you where people are right now. They're rethinking how they use their hard-earned equity, and they want an option that fits their unique financial situation. Homeowners deserve more than one way to do that," Glass said.

Home equity investments differ from conventional loans because homeowners do not make monthly repayments on the amount advanced. Instead, the investor receives an agreed share of the home's value when the contract ends, typically through a sale, refinance, savings or another financing arrangement.

The structure can appeal to borrowers who want liquidity but are reluctant to refinance into a higher-rate mortgage or add a new monthly payment while rates remain elevated. It also carries trade-offs, since the amount ultimately repaid depends on how the home's value changes over time.

One homeowner cited by the company, JoAnne Grossman of South Carolina, said she turned to the product after deciding that more traditional borrowing options were not suitable for her needs. She said she used the funds to replace central air and reduce debt.

"When costs keep going up, it's easy to feel stuck, even when you've done everything right. You work hard for your home, and it's stressful when it needs more than you have on hand. Hometap gave me the confidence to take care of what mattered," Grossman said.

Hometap's latest figures come after the Federal Reserve raised rates in September for the first time since July 2023, before holding them steady at its next meeting. The company said many market participants still expect another increase, a prospect that could keep pressure on borrowing costs and sustain interest in products tied to home equity.

Carmen Vetere, Chief Growth Officer at Hometap, said the company was seeing continued consumer interest in alternatives as homeowners weigh how to use accumulated equity.

"The demand we're seeing reflects a real need, and we expect it to continue, especially if rates rise again in December. Our focus is reaching homeowners when they are researching their options, with transparent information so they can decide whether a home equity investment is right for them," Vetere said.