Floundering Home Prices Are Taking A Bite Out Of Home Equity Car Loans

ARLINGTON, Va. - During the recent run-up in home prices (approximately 2003-2006 in most markets), consumers reportedly were using their home equity to pay off auto loans, or even to purchase cars, but credit unions can expect to see that activity taper off, if it hasn't already.

Using the tax-advantaged home equity loan to help finance a car had become a popular notion, and one that some credit unions actively promoted, but the floundering housing market may be blunting that strategy.

NAFCU Staff Economist Katrin O'Connor said the number of home equity loans among all federally insured credit unions increased by an annualized 3.1% during the first nine months of 2007, compared to an 8.34% increase for the year 2006 according to NCUA Call Report data.

"Thus, the growth in the number of home equity loans has noticeably slowed down in 2007," O'Connor assessed. "Even though we do not have any numbers on how many credit union members are using home equity (loans or lines of credit) to pay off vehicle loans or purchase new vehicles, the slowdown in the number of home equity loans suggests that this activity has dried up or at least significantly slowed down." (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com