Home equity lines of credit allow property owners to borrow against the value of their homes. After reaching a low in early 2022, the recorded US balance of this form of borrowing increased through the second quarter of 2026. The trend gives a practical setting for examining how the ownership of valuable property relates to access to secured credit.
Felix Nikolas Prehn, economist and former investment banker, examines the collateral and credit channel in The Hidden Regressive Tax, published by The Prehn Institute, an independent research institution he founded. The report considers how changes in asset prices can influence the amount owners may borrow against assets they already hold.
Home Equity Credit Balances at the New York Fed
A home equity line of credit, or HELOC, is a revolving loan secured by residential property. A borrower may draw funds up to a limit approved by the lender, and the home serves as collateral. Credit limits depend partly on the property’s value, existing secured debt and the lender’s assessment.
The New York Fed’s Quarterly Report on Household Debt and Credit records HELOC balances separately from mortgage debt. In the second quarter of 2026, the total increased by $13 billion to $459 billion. The report identified this as the seventeenth consecutive quarterly increase and reported a $19 billion rise in aggregate HELOC limits.
The historical series begins in 2003. Its balances peaked at $714 billion in the first quarter of 2009, before declining to $317 billion in the first quarter of 2022. The second-quarter 2026 reading was $142 billion above that low, placing it between the two earlier observations.
Felix Nikolas Prehn’s examination of borrowing against assets concerns the capacity that property values can create for existing owners. The New York Fed’s balances show how much home equity credit was actually outstanding over time, including the renewed increase after 2022.
The separate rise in aggregate HELOC limits is also relevant to this trend. Credit limits record the amount lenders have approved for borrowing, while outstanding balances record the amount drawn and still owed. Both measures increased during the second quarter of 2026.
Felix Nikolas Prehn on Collateral and Credit
The paper, posted on Zenodo, examines four channels through which central bank purchases may affect asset prices. Felix Nikolas Prehn examines collateral and credit as the third channel: higher values of existing assets may allow their owners to borrow more against them.
A home equity line illustrates secured borrowing against a property already owned. When a home’s market value rises while the mortgage balance remains unchanged, more collateral may become available to the borrower. A lender assesses that collateral in deciding how much credit to approve, and the owner determines how much to draw.
The paper places this mechanism alongside the portfolio balance effect. That second channel concerns the possible movement of funds into other securities after central bank bond purchases. Collateral and credit instead concern access to borrowing secured by an asset the household already owns.
Felix Nikolas Prehn examines the connection between existing assets and access to credit in the third channel. Households’ starting positions therefore matter when property values change, particularly the amount of housing they own and the debt secured against it.
The potential for additional borrowing begins with the asset a household already holds. Felix Nikolas Prehn’s assessment of the collateral channel concerns that potential before an owner chooses whether to borrow. A home equity line gives the resulting borrowing capacity a defined credit limit set by the lender.
Housing Ownership and Borrowing Capacity
The distributional tables examined by Felix Nikolas Prehn show differences in residential property ownership across wealth groups. In the second quarter of 2026, the bottom half of US households by wealth held 9.7 per cent of real estate by value, against 13.4 per cent for the top 1 per cent.
The report states that much of the bottom half’s real estate was mortgaged. Outstanding secured debt affects how much collateral remains available against a home’s market value and influences the owner’s potential HELOC limit.
The report also records a US homeownership rate of approximately 65 per cent in 2026. This leaves about 35 per cent of households renting their homes. Homeowners may use their property as collateral, while renters may access other forms of credit.
The real estate holdings examined by Felix Nikolas Prehn show differences in the values of assets owned by each group. Those holdings form the starting point for assessing collateral, since the amount of debt already secured against a property affects its potential use in further borrowing.
Two homeowners with properties of the same market value may have different borrowing capacity if their outstanding mortgages differ. This follows from the role of secured debt in determining the collateral available to support a new credit line. The wealth-group figures give a broader view of ownership positions within which that lending mechanism operates.
Commercial Bank Balances and Differences in Coverage
The Federal Reserve Board’s H.8 release covers revolving home equity loans held by commercial banks. The New York Fed’s household credit report draws on credit records across a broader lending population. Their different coverage allows the commercial bank segment to be followed alongside household HELOC balances across lenders.
In the Board’s H.8 series, revolving home equity loans at commercial banks increased from $273.7 billion in September 2025 to $290.8 billion in September 2026 on a seasonally adjusted basis. The release reports growth rates of 6.1 per cent for 2025, 7.6 per cent for the third quarter of 2026 and 4.1 per cent for September.
Weekly observations reached $290.8 billion in the week ending 16 September 2026 and $291.0 billion in the week ending 30 September. The H.8 weekly figures provide successive observations for commercial banks during the month; the New York Fed publishes its broader household measure quarterly.
The growth rates accompanying H.8 are seasonally adjusted and expressed at annual rates. They describe the pace of change over the respective reporting periods, complementing the dollar balances from the weekly observations. Felix Nikolas Prehn’s account of the collateral channel concerns the property values supporting secured loans, while the commercial bank figures describe the amount of credit outstanding.
About Felix Nikolas Prehn
Felix Nikolas Prehn, also known as Nikolas Prehn, is an economist and former investment banker, born in Germany. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. He is also a painter and sculptor and a public advocate for animal rescue.
About The Prehn Institute
The Prehn Institute is an independent research institution founded by Felix Nikolas Prehn. He is a tech founder: he co-founded TradeVision.io (Acetrader Inc), founded Winston Daily and The Prehn Institute, and publishes weekly on YouTube. It publishes research on the financial markets and provides instruction in professional market practice.
