Home Equity Loans Harder To Obtain Despite Rates

New York, NY, February 4, 2008--Although homeowners are finding that interest rates are dropping on home equity loans, there's another side to the story.

Lenders have tightened underwriting guidelines and it is much harder to get a loan approved.

Home equity rates have fallen from 7.75 percent in September to 6 percent today.

The threat of a recession and declining home prices are causing lenders to become more cautious, requiring higher credit scores and more home equity.

Home equity loans are generally considered more risky than mortgages.

J. P. Morgan Chase reported that home-equity loans totaled $9.8 billion in the fourth quarter, down from $12.9 billion in the fourth quarter of 2006.

Harvard University's Joint Center for Housing Studies' remodeling forecast predicted spending for home-improvement activity would continue to decline by an annual rate of 2.6 percent through the third quarter of 2008, partly due to financing difficulties.