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we the sheeple

Magic Hew / Mew Machine In Reverse

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Here are the annual Home Equity Withdrawal figure for the last 16 years

To Q1 94 = +.557B

To Q1 95 = -.637B

To Q1 96 = -5.703B

To Q1 97 = -2.507B

To Q1 98 = -1.044B

To Q1 99 = +8.15B

To Q1 00 = +12.216B

To Q1 01 = +13.163B

To Q1 02 = +24.975B

To Q1 03 = +45.100B

To Q1 04 = +58.793B

To Q1 05 = +41.109B

To Q1 06 = +42.605B

To Q1 07 = +52.042B

To Q1 08 = +35.689B

To Q1 09 = -23.465B

http://www.bankofengland.co.uk/statistics/.../mar/tablea.xls

So, 09 vs 07 is a reduction of £75B for the year.

Discuss...

Edited by we the sheeple

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Good spot. Can somebody graph that, please.

Take away the MEW and Gordon's economic miracle was pure illusion.

Debt is Debt.

Edited by tinker

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Good spot. Can somebody graph that, please.

Take away, the MEW and Gordon's economic miracle was pure illusion.

Debt is Debt.

It's certainly the case that the annual amount of HEW/MEW in each of the boom years was of the same order of magnitude as the annual increase in GDP,

Peter.

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Good spot. Can somebody graph that, please.

Take away the MEW and Gordon's economic miracle was pure illusion.

Debt is Debt.

No. Debt = consumption = Wealth

Please run along to your nearest re-programming centre for the cooperballs upgrade.

BoE figures go back to 1970 and the very peak in this graph was Q4 2003, but I am sorry I haven't worked out how to scale at the bottom.

This is the biggest payback of mortgage debt ever. It appears people are paying down the debt rather than spending. However, it has occurred that we are in a situation where MEW is almost gone, and maybe what we are seeing is just the normal repayment mortgages chuntering along naturally.

Any way of finding this out?

Edit to add:

It is probably a good idea to tell you what this graph actually shows. :)

It is charting "HEW as a percentage of post-tax income" I thought this might be more useful than the actual amounts as it shows things in the historical context a little better.

It also shows HEW in the last bubble and just how much more we are paying back. Could be the low IR scenario compared to last time.

HEW.JPG

post-9535-1246617141_thumb.jpg

Edited by bobthe~

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Here are the annual Home Equity Withdrawal figure for the last 16 years

To Q1 94 = +.557B

To Q1 95 = -.637B

To Q1 96 = -5.703B

To Q1 97 = -2.507B

To Q1 98 = -1.044B

To Q1 99 = +8.15B

To Q1 00 = +12.216B

To Q1 01 = +13.163B

To Q1 02 = +24.975B

To Q1 03 = +45.100B

To Q1 04 = +58.793B

To Q1 05 = +41.109B

To Q1 06 = +42.605B

To Q1 07 = +52.042B

To Q1 08 = +35.689B

To Q1 09 = -23.465B

http://www.bankofengland.co.uk/statistics/.../mar/tablea.xls

So, 09 vs 07 is a reduction of £75B for the year.

Discuss...

Great spot, so first negative MEW since 1998! Certainly something to monitor quaterly. And as someone else pointed out all money spent in economy. How about a graph showing GDP and then GDP less MEW?

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http://news.bbc.co.uk/1/hi/business/8132081.stm

Homeowners repaid a record amount of their mortgages in the first three months of 2009, figures have shown.

An estimated £8.1bn was repaid, according to Bank of England statistics, taking the total to £76bn for the year to the end of March.

From early last year, falling house prices and strict mortgage rationing halted top-up borrowing on mortgages.

Prior to that, home owners had borrowed more than £300bn extra against the rising value of their homes since 2000.

'Batten down'

"The hedonistic days of living the good life and borrowing against the value of your property are a distant memory," said Ashley Brown of mortgage broker Moneysprite.

"Homeowners now recognise that this is the time to batten down the hatches and reduce their debt rather than live on credit," he added.

The Bank of England explained that the switch from mortgage equity withdrawal, to the expansion of equity held by homeowners, did not just reflect conscious decisions by homeowners to pay off some of their loans.

It was also affected by lenders requiring larger deposits when lending to people buying homes, thus producing a greater injection of equity into the property.

Relaxation

Separate figures from the financial information service Moneyfacts have revealed a further slight relaxation in lending by banks and building societies in the past month.

At the beginning of July there were 119 mortgage deals available which asked for only a 10% deposit.

Although far fewer than a year ago, this is up from 101 such deals at the start of last month.

"It is encouraging to see that products available with 90% loan-to-values are creeping up," said Darren Cook of Moneyfacts.

"The increase is not enough to signal that mortgage providers are returning to healthy or normal appetites to lend.

"But [it is] more of an indication that they are re-expanding their product ranges, after reducing them to the bare minimum when the future prospects and attitudes towards risk looked extremely bleak," he added.

At the beginning of May 2008, mortgages requiring just a 10% down-payment made up nearly 40% of all mortgaged deals on offer.

But there was a dramatic tightening of lending criteria as the year went on, as lenders sought to ration their available funds to only the most credit worthy customers.

Now, 10% deposit mortgages make up just 7.5% of available home loans, with 65% of deals now requiring a deposit of at least 25%.

People don't borrow and the economy contracts.

Debt is wealth.

It seems that people are being far more cautious and don't want to borrow.

However is it really good news for the banking sector as those over paying clearly won't be those in trouble and facing repossession so will over repayments cover the losses from those that can't?

Edited by interestrateripoff

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Negative Mew, debt it wealth :P In essence in a crash people pay there debts down more than they re-mortgage for more money. People are being sensible (unlike the gov), and working extra hard to pay mortgage debts down. At the peak MEW/HEW accounted for an average extra income of 10% of total uk income, negative MEW is an average reduced income as people reduce debt.

I remember 2004 threads on this data, and people getting very excited at MEW falling...

Edited by moosetea

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76bn over how many mortgages?

is there 20m?

so how much has been repaid per mortgage?

76 billion / 20 million = three thousand eight hundred

That sounds a lot...

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Negative Mew, debt it wealth :P In essence in a crash people pay there debts down more than they re-mortgage for more money. People are being sensible (unlike the gov), and working extra hard to pay mortgage debts down. At the peak MEW/HEW accounted for an average extra income of 10% of total uk income, negative MEW is an average reduced income as people reduce debt.

Are you saying that normally they only pay off 1.5% of the mortgage (the peak figure was 8.5% of after tax income).

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This is the kind of thread that HPC is all about. (that and the climate change debates, anarchists, Public sector bashing and lizards).

Great OP and graphs.

Can anyone plot this against "growth"? is there a meaningful scale that would display that?

Cheers in advance

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Are you saying that normally they only pay off 1.5% of the mortgage (the peak figure was 8.5% of after tax income).

Im saying in the boom people werent paying off the mortgage, they were extending it. The average home-owners were extending it by each year was just shy 10% of the entire UK income!

hew.gif

They are now paying down the debt by 5% of annual income each year. Hew is a very good corrilation to boom/bust as debt is wealth. The mini crash in 04 occured at the same time as a massive reduction in HEW/MEW, when Irs were dropped the HEW/MEW recovered. The graph shows how government can adjust the uks average income by changing the direction of houseprices/changing interest rates. HEW/MEW was negative in the last crash, and the recovery occurred when HEW/MEW went positive.

Edited by moosetea

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However, it has occurred that we are in a situation where MEW is almost gone, and maybe what we are seeing is just the normal repayment mortgages chuntering along naturally.

Any way of finding this out?

I am not so sure because of the big quarterly fluctuations. Here are 2007-2009 quarterly numbers:

2007 13,524

9,729

12,020

7,207

2008 6,733

-1,745

-5,816

-7,763

2009 -8,141

Interesting also to look at numbers in previous boom!

Eg big increase in late 1980s, where even more withdrawn as % household income than 2007 and then collapse in early 1990s, until 1999.

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Untitled.png

That's very much a "says it all really" graph. To put that into context, the defence budget for this year is £35bn, so the peak to current low change is roughly the equivalent of twice the budget required maintain a credible nuclear deterant, fight two overseas conflicts, and still carry out the military's peacetime tasks.

That's a lot of money.

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Is this recent trend more about low interest rates?

For example, if you've got a repayment mortgage, you're just paying in the same every month, but more is capital repayment and less is interest?

Not everyone is spending their free money on big tvs.

EDIT: Fat fingers

Edited by twatmangle

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That's very much a "says it all really" graph. To put that into context, the defence budget for this year is £35bn, so the peak to current low change is roughly the equivalent of twice the budget required maintain a credible nuclear deterant, fight two overseas conflicts, and still carry out the military's peacetime tasks.

That's a lot of money.

and that is all lost income.... a whole heap less spent in shops, on cars, on starting businesses etc etc...If you can get people borrowing again, the economy is saved........ ;p

Edited by moosetea

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Im saying in the boom people werent paying off the mortgage, they were extending it. The average home-owners were extending it by each year was just shy 10% of the entire UK income!

<edit to snip image>

They are now paying down the debt by 5% of annual income each year. Hew is a very good corrilation to boom/bust as debt is wealth. The mini crash in 04 occured at the same time as a massive reduction in HEW/MEW, when Irs were dropped the HEW/MEW recovered. The graph shows how government can adjust the uks average income by changing the direction of houseprices/changing interest rates. HEW/MEW was negative in the last crash, and the recovery occurred when HEW/MEW went positive.

Ah right I understand now. Apples and oranges. You are talking about GDP I was talking about post tax incomes.

On your second point, I think that it is more likely that the HEW recovered when the economy did, but have nothing to back this up in figures, maybe GDP vs HEW would be a good chart to see. It might tell us which one lagged the other (if at all).

And was it the govt dropping IRs or was it the explosion of Liar Loans and sub prime lending that drove the last hurrah for MEW between '04 and '07?

Edited by bobthe~

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and that is all lost income.... a whole heap less spent in shops, on cars, on starting businesses etc etc...If you can get people borrowing again, the economy is saved........ ;p

Don't worry Gordon will borrow more to make up for it.

If we won't borrow he will because it's the right thing to do.

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Ah right I understand now. Apples and oranges. You are talking about GDP I was talking about post tax incomes.

On your second point, I think that it is more likely that the HEW recovered when the economy did, but have nothing to back this up in igures, maybe GDP vs HEW would be a good chart to see. It might tell us which one lagged the other (if at all).

And was it the govt dropping IRs or was it the explosion of Liar Loans and sub prime lending that drove the last hurrah for MEW between '04 and '07?

Wish list:

GDP vs HEW vs IR

:P

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Ah right I understand now. Apples and oranges. You are talking about GDP I was talking about post tax incomes.

On your second point, I think that it is more likely that the HEW recovered when the economy did, but have nothing to back this up in igures, maybe GDP vs HEW would be a good chart to see. It might tell us which one lagged the other (if at all).

And was it the govt dropping IRs or was it the explosion of Liar Loans and sub prime lending that drove the last hurrah for MEW between '04 and '07?

IMHO the trigger was the drop in interest rates, the economy was teetering house prices were falling but they were saved by Gordon at the last minute. Ones the mini boom had started the cheap money chased the boom....

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