Rapid increase in home equity loans appears to be over

Rising interest rates (prime has climbed from 4% to 7.5% in three years) appear to have convinced many home owners to forego revolving home equity loans, which often base their interest rates on prime.

Federal Reserve data show growth in volume of home-equity loans at commercial banks grew 30-40% a year from 2002 to the middle of 2005, peaking at $439 billion outstanding in August. Since then volume has dropped slightly to $433 billion, 5% over the volume twelve-months earlier.

The Wall Street Journal says that, while many economists see home-equity borrowing pull back this year, the do not agree on how mcuh this will affect consumer spending.

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