HOME EQUITY LOANS BECOME MORE POPULAR

Americans recognize a tax break when they see one. According to the Consumer Bankers Association (CBA), the popularity of home-equity lines of credit picked up significantly in 1988. The average financial institution showed 57 percent growth in the dollar volume of approved credit lines.

The average amount of outstanding home equity credit per institution increased 69 percent, to $131.9 million, from $84.1 million in 1987. Some 850 institutions - mostly banks but some larger savings-and-loan associations as well - belong to the CBA.

The average amount of home-equity line credit actually borrowed was $24,710 at year-end 1988, up from $21,989 in 1987. That 1988 number represented 65 percent of the maximum credit line approved. Twenty percent of credit lines were not in use at all.

Under the 1986 tax reform law, taxpayers can deduct interest on home equity loans. But the proportion of interest deductible on consumer loans, such as outstanding borrowings on credit cards or automobile finance loans, has been diminishing.

Another advantage for home-equity loans, says CBA spokesman Fritz Elmendorf, is convenience. Homeowners can draw on their credit lines at any time by simply writing a check.

Ninety-eight percent of these loans had a variable interest rate. The prime rate was used as an index by 79 percent of lenders. Treasury bill rates were used as an index by 12 percent of lenders.