Consuming ourhome equity
By

(MONEY Magazine) – A sharp rise in tax-deductible home-equity and second-mortgage loans has contributed to a dramatic decline in the equity that Americans hold in their homes, as the charts above show. Indeed, the equity held by homeowners fell 15.7% in 1990, the steepest drop in at least 45 years. Alarmed by this trend and by the extent to which consumers are using home-equity loans for purposes such as vacations and car purchases, Congress has asked the General Accounting Office to investigate equity borrowing. Depending on the GAO's report, expected in three months, Capitol Hill may curb the tax advantages of these lines of credit.

BOX: COMMON INDEXES FOR ARMs

One-year Treasury constant maturity 6.31% 11th District cost of funds 7.16 National mortgage contract rate 9.12

Note: Averages are for July, June and July, respectively. Source: HSH Associates. For the latest information on mortgage rates in your area, plus a kit that will help you select the right loan, call toll-free for MONEY | Magazine's Mortgage Match at 800-243-8474. Cost: $29.95

CHART: NOT AVAILABLE

CHART: NOT AVAILABLE CREDIT: Source: HSH Associates CAPTION: LEADING RATES IN THE 24 LARGEST METRO AREAS

CHART: NOT AVAILABLE CREDIT: Source: HSH Associates CAPTION: LEADING FIXED RATES IN THE 24 LARGEST METRO AREAS

CHART: NOT AVAILABLE CREDIT: Source: HSH Associates CAPTION: LEADING ARMs IN THE 24 LARGEST METRO AREAS