SoFi (SOFI -1.22%) has roughly tripled over the past year, and to be sure, there is a lot to like about the banking disruptor. For example, in the most recent quarter, SoFi added 800,000 new members -- its highest single-quarter total ever.
In addition, SoFi's loan platform, where it originates loans on behalf of third-party partners, is turning into an impressive generator of capital-light fee income. SoFi could also be a big beneficiary of the student loan limitations contained in the recent tax and spending bill. And SoFi recently announced that cryptocurrency trading will return to its platform by the end of the year. I could go on, but you get the idea. This company has a lot going for it.
However, SoFi has yet another opportunity that isn't getting much attention -- at least not yet. But this could possibly be SoFi's largest market opportunity of all, and it's a product that the company already offers.
Image source: Getty Images.
A $35 trillion market opportunity
A few years ago, millions of Americans were tapping into their home equity. In fact, I'm not sure I could name a homeowner friend who didn't refinance or get some sort of home equity loan during the 2020-2021 period.
However, once inflation hit hard in 2022 and interest rates began to rise quickly, this dried up. Many homeowners put big projects on hold that they otherwise would refinance their mortgage to fund. Sure, there are some people using their home equity right now. However, activity is significantly lower compared to the low-rate period.
Not only has refinancing and home equity lending volume plummeted, but home values have also risen dramatically over the past five years. As a result, homeowners in the United States have an all-time high of $35 trillion in equity in their homes.
SoFi's home loan growth is impressive
In the first quarter, SoFi's home loan originations totaled $518 million. This is less than one-tenth of its personal loan originations and about half of its student loan volume. So, it's a small part of the business today.
However, consider the progress SoFi has made. After a solid year in 2021, when 3% mortgage rates were common, SoFi's home loan volume fell off a cliff. In the first quarter of 2023, the company originated just $90 million in home loans. So, the volume from the first quarter of 2025 represents a 476% increase in volume in just two years.
What to watch
One thing that makes the home loan growth over the past two years especially impressive is that SoFi managed to do it in a terrible environment for home loans. Relatively few people are currently tapping into their home equity, and the existing home sales market remains very low.
The key factor that could trigger an inflection point is mortgage rates. As I'm writing this, the average 30-year mortgage rate in the United States is about 6.75%. If this falls to 6%, 5.5%, 5%, or even lower over the next few years, it could not only help thaw the sluggish real estate market but also trigger a wave of mortgage refinancing.
SoFi currently offers refinancing loans (including cash-out refinancing), a variety of purchase mortgages, and home equity loans and home equity lines of credit (HELOCs). In fact, SoFi's HELOCs have some competitive advantages, such as no application fees and the ability to borrow up to 90% of your home equity (many lenders limit this to 80%). As mentioned, Americans are sitting on $35 trillion in home equity, so the surge in volume could be massive.
The bottom line is that SoFi's home loan business isn't a major component of its ecosystem yet, but it's heading in that direction. And if rates fall significantly, it could become one of the bank's most exciting opportunities.
