Nonbank lenders have seized control of the home equity line of credit market, capturing significant share from traditional banks as Americans tap into record levels of available home equity. These alternative lenders grew HELOC originations roughly 140 percent from 2023 through 2025, while depository institutions expanded their HELOC books by a modest 7 to 20 percent over the same period, according to a new white paper.
The shift reflects a structural change in how homeowners access their accumulated equity. Total tappable equity across the U.S. housing market now sits at approximately $11 trillion, giving borrowers substantial ammunition to refinance debt, fund renovations, or cover major expenses without selling their homes.
Nonbank HELOC originators include companies like Better.com, Upgrade, and various fintech platforms that operate outside the traditional banking infrastructure. These lenders offer streamlined underwriting, faster closing timelines, and digital-first application processes that appeal to borrowers seeking speed and convenience. Traditional banks like JPMorgan Chase, Bank of America, and Wells Fargo have not prioritized HELOC growth to the same degree, partly because these products carry regulatory overhead and compete internally with other lending products.
The equity boom stems from persistent home price appreciation over the past five years, even as mortgage rates climbed. Homeowners who locked in sub-4 percent mortgages a decade ago now sit on significantly more home value than they owe. This gap between current home value and remaining mortgage balance creates the pool of accessible equity that nonbanks actively court.
For homeowners, nonbank HELOCs often come with variable interest rates tied to the prime rate. These products appeal during periods of expected rate cuts but carry risk if the Federal Reserve maintains higher rates longer than anticipated. Nonbank HELOCs typically carry higher rates than bank-offered alternatives, though they compensate with faster approval and less stringent documentation requirements.
Mortgage brokers and loan officers report that nonbank HELOC lenders now actively compete on rate and terms. Companies like LendingClub and SoFi have entered the space aggressively. This competition benefits borrowers through improved pricing and terms, though the variable-rate nature of most HELOCs introduces interest rate risk that fixed-rate products do not.
For traditional banks, the loss of HELOC share raises questions about their distribution strategy and product competitiveness. Community banks and regional lenders have largely ceded ground to nonbanks, focusing instead on core deposit relationships and mortgage origination.
The trend also signals changing consumer preferences. Borrowers increasingly trust fintech platforms for credit products, especially when nonbanks deliver faster turnaround and simpler processes. The 140 percent growth rate among nonbanks dwarfs the single-digit expansion at traditional lenders.
As tappable equity approaches $11 trillion, competition for these borrowers will intensify. Nonbanks have captured the momentum, but banks retain an opportunity to recapture share through product innovation and streamlined digital underwriting. The next two years will reveal whether traditional lenders can reverse this trend or whether nonbanks have permanently altered the HELOC landscape.