Published by REALTOR.com | April 9, 2025
Job instability and high interest rates have left millions of homeowners with a mortgage locked out of $731 billion in home equity.
Homeowners have long relied on their home equity, often touted as “America’s piggy bank,” to meet their changing financial needs, from paying off credit card debt to footing college tuition bills. But now, millions of mortgage borrowers are finding themselves locked out of accessing it, according to a new report.
A combination of elevated interest rates and increasing job instability in the post-pandemic era is to blame for yanking the safety net of home equity out of the grasp of many Americans, according to a study conducted by home equity investment firm Point.
The report, released on Wednesday, claims that more than 9% of all homeowners with a mortgage, which translates to about 4.6 million people, experience a job loss or another negative career shift in a given year, which carries the potential of tanking their credit score.
As a result, these unfortunate homeowners face the possibility of being blocked from using an estimated $731 billion in home equity.
What that means in practical terms is that a homeowner who has been laid off and saw their credit score plummet could potentially be barred from taking out a loan against their home equity, which is the difference between the amount they owe on a mortgage and the home’s value.
The total American home equity reached $34.7 trillion last year, representing a staggering 80% surge since 2020 thanks to skyrocketing home prices, but a sizeable share of that housing wealth is “locked in.”
What is blocking home equity access?
Point economist Aaron Terrazas explains in his report that two key shifts are responsible for the home equity crisis: persistently high long-term interest rates and job volatility.
The main problem with higher rates is that they significantly hike up the cost of borrowing against home equity, making traditional options like cash-out refinancing less desirable because they increase a homeowner’s monthly mortgage payment.
Then there is the normalization of what Terrazas calls “jungle gym” careers, gig work, and self-employment.
“Jungle gym” careers are characterized by frequent job transitions, lateral moves, and setbacks. All of these changes cause financial instability and are associated with what the study calls “shocks” to borrowers’ credit scores that hamper home equity access.
With rising unemployment figures in March, including sweeping federal job cuts overseen by the Trump administration’s Department of Government Efficiency, more homeowners are expected to face challenges in 2025 when trying to make use of their housing wealth at their time of need.
Not surprisingly, perhaps, the latest Fannie Mae Home Purchase Sentiment Index highlights the uncertainty that many Americans feel around their job security. Almost one-third of respondents cited concerns over losing their job in the next year, up 9 percentage points annually.
