KBRA releases research analyzing the loan origination process, loan characteristics, ABS issuance, performance trends, and rating activity for the home improvement (HI) ABS segment of the unsecured consumer loan market.

Historically, homeowners have typically sought to improve their housing situation by moving. In the past few years, however, many have opted to remain in their current homes amid high home prices and relatively elevated interest rates—choosing instead to upgrade their living conditions via renovations and remodels. For larger projects, cash-out mortgage refinancing is no longer an appealing or efficient option owing to the rate environment. Home equity products (such as home equity line of credit (HELOC) or closed-end second lien mortgages) can take several weeks or months to underwrite. On the other hand, HI loans can be underwritten in days (and in many cases, minutes) and can be more affordable than other types of personal loans, as many offer promotional periods with low or no interest. The growing popularity of home improvement loans is unsurprising, as reflected in the rise of HI ABS issuance to over $5.8 billion in 2024 from under $2 billion in 2019.

In the U.S., home renovation and repair expenditures were initially estimated to total more than $500 billion in 2025, a 1.2% increase year-over-year. The effect of tariffs could contribute to demand if housing prices remain high and employment does not meaningfully deteriorate, as it will likely result in increased material costs that prompt consumers to seek financing and/or higher loan balances. However, if elevated tariffs lead to an economic slowdown and increased unemployment, borrowers may postpone major home improvement projects and lenders may tighten underwriting—ultimately reducing originations and, in turn, HI ABS issuance.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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