The inaugural study evaluates customer perceptions of the HELOC process and explores the key variables that influence customer choice, satisfaction and loyalty based on six factors: offerings and terms; application/approval process; closing; interaction with the lender; billing and payment; and post-closing and usage.

"Lenders need to recognize that the HELOC customer experience is a journey that begins with initial consideration and evaluation and extends through to usage, with each part of the journey affecting overall perceptions," said Craig Martin, Senior Director of Financial Services at J.D. Power. "Increasingly, many steps in that process are occurring in digital and mobile channels, which are areas that the industry has been slow to leverage and refine. As Millennial² homeownership rates increase and home values continue to rise, lenders need to be able to meet these customers where they want to be, not try to force them into the lender's entrenched methods."

Following are some of the key findings of the study:

• Digital channels become critical for younger borrowers: Established relationships with lenders still play a key role in the HELOC customer journey, with 66% of all borrowers gathering information about a HELOC in person. However, digital is becoming a bigger factor among younger borrowers, with 59% of Millennials gathering information online via desktop computers and 50% of Millennials gathering information online via smartphones or tablets.

• Few HELOC borrowers say they are proactively solicited: The majority (88%) of HELOC borrowers say they began the HELOC search without prompting from a lender, demonstrating that marketing efforts are not having much effect on customers. The group in the study least likely to hear from lenders are Millennials, 94% of whom initiated a HELOC product search themselves.

• Comparison shopping is the norm: More than half (55%) of customers indicate they considered at least one other lender during their shopping process. The comparison-shopping phenomenon is most pronounced amongst Millennials, of which 80% of HELOC borrowers considered at least one other lender.

• Concern is the rule, not the exception: Nearly two-thirds (64%) of all borrowers express some type of concern about obtaining a HELOC product, with Millennial customers showing the highest levels of concern. Only 13% say they had no concerns. Key concerns include the variable nature of the loan and overextending themselves. 

"Steadily rising home prices, rising equity in the home and growing competition among lenders creates an opportunity for homeowners to tap into a low-cost source of funds," Martin added. "The findings in this study are not only instructive to lenders on how to better tailor their customer offerings and processes to create a better experience, but they also provide a valuable guide to consumers on what to look for when shopping and applying for a HELOC product and choosing a partner for their borrowing needs."