Housing Equity Withdrawal

[danlee74]

All this talk about MEWing set me thinking ... how much has been "released" and what does it matter? According to http://www.housepricecrash.co.uk/graphs-housing-equity-withdrawal.php a total of 321bn was released between Q3 1998 and including Q1 2008 with 50bn being repaid since.

What does this mean?!

If this has already been discussed please can someone post a link?

Many thanks

[fallingbuzzard]

It means that the prosperity and most of the economic growth during the last decade was an illusion, it was all created by advancing money to people against mortgages thereby enabling them to spend. Until that restarts there will be no more illusions of prosperity or growth.

The 321bn is nearer 550bn that has been released but thats because stats never tell a true picture, and of the 50bn "repaid" a small proportion (no more than 5-10bn) is repayment of the 321bn, the rest is scheduled mortgage repayments. People and the country can barely service mortgage debt, let alone repay it.

All this talk about MEWing set me thinking ... how much has been "released" and what does it matter? According to http://www.housepricecrash.co.uk/graphs-housing-equity-withdrawal.php a total of 321bn was released between Q3 1998 and including Q1 2008 with 50bn being repaid since.

What does this mean?!

If this has already been discussed please can someone post a link?

Many thanks

Edited December 29, 2010 by fallingbuzzard

[Reck B]

I love the way equity is 'released' as if it were locked away against it's will.

Over the last 14 or so years, equity (the difference between the amount owed and the houses value) became mostly made up from house prices rising as opposed to people paying off their mortgage.

People were encouraged to use their house like a cash machine, which is silly for one main reason - withdrawing from a bank account is cash that you have already worked for and earnt*. - using your house as a cash machine is simply stealing your future efforts from yourself and adding extra interest and years onto your mortgage. *ok - not in every case, but you get the point

This has been "great" for the economy and a few people at the top of financial institutions and even the individual who has a shiny new beemer or 2 on the driveway and generally lived a lifestyle that their wages alone could never support....for a while anyway... and by great, I mean 'a totally false economy which will ruin the lifes of people who got sucked into the madness'. (The few people at the top will be fine - don't worry about that!)

Now it's time to pay the piper. The debt has to be repaid! We hit saturation point a couple of years ago and I think I read somewhere that without MEW money, we were in recession in the early 2000's.

Gordons miracle economy was a housing equity credit boom.

Clever chap, that Gordon.

and by clever, I mean mental.

Edited December 29, 2010 by Reck B

[interestrateripoff]

It means for a time we where rich beyond out means, now we realise what our means are it has become apparent we are flat broke and everyone is going to have to hand back the 40" TV's they've all got in the living room, kitchen and bedrooms.

[Reck B]

It means for a time we where rich beyond out means, now we realise what our means are it has become apparent we are flat broke and everyone is going to have to hand back the 40" TV's they've all got in the living room, kitchen and bedrooms.

But can I keep the one in the downstairs lav?

[interestrateripoff]

But can I keep the one in the downstairs lav?

For hygiene reasons it's probably best.

[andybee33]

Great graph. It's interesting to look at the amount of MEWing that went on in 2003-4. I always assumed that the 'last hurrah' of 2007 was when the most vile excesses of the bubble took place (you'd believe that from the property-porn of the time) but it looks like the seeds of the debt crisis were sown a few years earlier.

Edited December 29, 2010 by andybee33

[Georgia O'Keeffe]

Great graph. It's interesting to look at the amount of MEWing that went on in 2003-4. I always assumed that the 'last hurrah' of 2007 was when the most vile excesses of the bubble took place (you'd believe that from the property-porn of the time) but it looks like the seeds of the debt crisis were sown a few years earlier.

yep, the seeds were sown in the mid 80s when they started the banking/leverage/debt bubble,from that point on in a modern democracy there was only ever one outcome

Edited December 29, 2010 by Tamara De Lempicka

[Flatdog]

MEW = money that doesn't exist, where is Injin when you need him?

[miko]

I love the way equity is 'released' as if it were locked away against it's will.

Over the last 14 or so years, equity (the difference between the amount owed and the houses value) became mostly made up from house prices rising as opposed to people paying off their mortgage.

People were encouraged to use their house like a cash machine, which is silly for one main reason - withdrawing from a bank account is cash that you have already worked for and earnt*. - using your house as a cash machine is simply stealing your future efforts from yourself and adding extra interest and years onto your mortgage. *ok - not in every case, but you get the point

This has been "great" for the economy and a few people at the top of financial institutions and even the individual who has a shiny new beemer or 2 on the driveway and generally lived a lifestyle that their wages alone could never support....for a while anyway... and by great, I mean 'a totally false economy which will ruin the lifes of people who got sucked into the madness'. (The few people at the top will be fine - don't worry about that!)

Now it's time to pay the piper. The debt has to be repaid! We hit saturation point a couple of years ago and I think I read somewhere that without MEW money, we were in recession in the early 2000's.

Gordons miracle economy was a housing equity credit boom.

Clever chap, that Gordon.

and by clever, I mean mental.

I worked with a guy who bought a house in the late 90's taking 10k negative equity with him from the first home he had bought . This second home 3 bed semi was about 75/80k.

He and his wife worked at the same firm . We were on very good money plus profit share, share rewards and share savings schemes. From about 2000 it was on the cards that the place would shut , so we all had plenty of time to get finances sorted. When we left we all got a very good redundancy pay out. His wife went first about 5 years before him and soon got another job ( less pay but still not bad) When he went two years ago they sold the house for £250k and according to his brother that did not clear all the debts. They had loans and CC debt everywhere plus had mewed the fu-k out of the house.

Today his salary minus tax NI and travel just pays the rent , her money has to cover everything else and his brother beleives that they are raking up more debt.

Oh the joys of MEW , all those new cars over the years , the USA holiday the skying each year the meals out and at 48 nothing to show for it but two spoilt kids who now want their parents to pay for driving lessons and buy them a car , they cannot understand why their parents have not got the money to indulge them like they always did.

[Protect Rural England]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

Ho, ho , ho. "Release" 300k, use 100k to pay the monthly debt of £300k over the next 10 years. £200k spare cash. Help out the kids (without attracting the interest of HMRC obviously.

10 years later you peg out.

So what's the score? Well the bank tell the Executors to sell asap to avoid non payments of the £300k MEWed loan.

Say £600k raised, £300k reimbursed to bank and £300k left. Ah yes, what's the IHT limit?

Personally I think this is a winner. Everyone happy except HMRC who cannot collect.

[RufflesTheGuineaPig]

MEW = money that doesn't exist, where is Injin when you need him?

MEW = Borrowing.

You're not extracting excess money from your house, you're taking out a second mortgage.

If people had thought of it like this, far fewer would have done it.

[Protect Rural England]

MEW = Borrowing.

You're not extracting excess money from your house, you're taking out a second mortgage.

If people had thought of it like this, far fewer would have done it.

Yes. A second mortgage.

The only institution being deprived when pay day comes is HMRC

[miko]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

Ho, ho , ho. "Release" 300k, use 100k to pay the monthly debt of £300k over the next 10 years. £200k spare cash. Help out the kids (without attracting the interest of HMRC obviously.

10 years later you peg out.

So what's the score? Well the bank tell the Executors to sell asap to avoid non payments of the £300k MEWed loan.

Say £600k raised, £300k reimbursed to bank and £300k left. Ah yes, what's the IHT limit?

Personally I think this is a winner. Everyone happy except HMRC who cannot collect.

Yes at that age fine , but not when you are in your 20's/30's/40's

[tinker]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

A reasonable point and in some respects that is how the whole MEWing thing started, it enabled pensioners to unlock the equity in their homes (accumulated over many years) for the autumn years of their lives. I can see the adverts now...

However, once the banksters and the commission driven salesmen got involved, on the back of a deceitful manipulation of both inflation figures and interest rates, was applied to anyone with a mortgage/house on the back of a 5-year bubble to beef up the GDP figures. MEWing therefore now bore no relation to real wealth accumulation. It was was an extension of a credit line.

It was a disaster waiting to happen, because it was based on a lie and therefore unsustainable.

I can't remember the exact figure but this MEWing significantly added to GDP and gave the lie to Brown's boasts of XX consecutive quarters of growth. Take out the MEWing and we may well have been in recessionary territory much sooner. Worse still, it stopped the country from engaging in wealth creating activity because realism was removed from the economic picture.

Edited December 30, 2010 by tinker

[Protect Rural England]

Yes at that age fine , but not when you are in your 20's/30's/40's

It isn't a problem for those in their 20's or 30's. They cannot afford the deposit let alone have job security for 25 years worth of payments plus the stamp duty, council tax, running costs of a home.

For those in their 40's they are likely to have 10-15 years worth of mortgage payments still to go.

The game is over. Why is it so few can see that it is?

The sooner the whole thing comes off hard, the sooner we can all start again but this time sensibly.

[miko]

It isn't a problem for those in their 20's or 30's. They cannot afford the deposit let alone have job security for 25 years worth of payments plus the stamp duty, council tax, running costs of a home.

For those in their 40's they are likely to have 10-15 years worth of mortgage payments still to go.

The game is over. Why is it so few can see that it is?

The sooner the whole thing comes off hard, the sooner we can all start again but this time sensibly.

Ten years ago and better still 15 years ago those in their 20's/30's bought houses and it was a bad thing for them to mew ( see my post 11) on this.

What game is over ?

[Protect Rural England]

Ten years ago and better still 15 years ago those in their 20's/30's bought houses and it was a bad thing for them to mew ( see my post 11) on this.

What game is over ?

The property pyramid ponzi ever higher home prices scam/game is over.

Still many cannot see it. They keep on borrowing, buying ever higher inflated property prices.

Have people really forgotten what it is like not to owe money?

Imagine waking up, not being in fear of the post and the dreaded bills.

No mortgage, no car payments, no bills other than phone, electricity, water and council tax.

I have forgotten what it must be like.

[interestrateripoff]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

Ho, ho , ho. "Release" 300k, use 100k to pay the monthly debt of £300k over the next 10 years. £200k spare cash. Help out the kids (without attracting the interest of HMRC obviously.

10 years later you peg out.

So what's the score? Well the bank tell the Executors to sell asap to avoid non payments of the £300k MEWed loan.

Say £600k raised, £300k reimbursed to bank and £300k left. Ah yes, what's the IHT limit?

Personally I think this is a winner. Everyone happy except HMRC who cannot collect.

What's wrong with selling the house for £600k, buy another for £300k and have £300k to play with for 10 years and travel the world, rather than giving the bankers £100k of it. I know which option I'd pick.

[South Lorne]

What's wrong with selling the house for £600k, buy another for £300k and have £300k to play with for 10 years and travel the world, rather than giving the bankers £100k of it. I know which option I'd pick.

...that is not mewing....in fact there is nothing wrong with it....

[tim123]

Yes at that age fine , but not when you are in your 20's/30's/40's

I agree

MEWing except for equity release as a pensioner should be banned, IMHO

tim

[tim123]

What's wrong with selling the house for £600k, buy another for £300k and have £300k to play with for 10 years and travel the world, rather than giving the bankers £100k of it. I know which option I'd pick.

Yes, but an awful lot of pensioners just can't bear to move from the house where they brought up their kids.

I know that it's absolutely stupid, but it's how it is.

tim

[fellow]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

Ho, ho , ho. "Release" 300k, use 100k to pay the monthly debt of £300k over the next 10 years. £200k spare cash. Help out the kids (without attracting the interest of HMRC obviously.

10 years later you peg out.

So what's the score? Well the bank tell the Executors to sell asap to avoid non payments of the £300k MEWed loan.

Say £600k raised, £300k reimbursed to bank and £300k left. Ah yes, what's the IHT limit?

Personally I think this is a winner. Everyone happy except HMRC who cannot collect.

What if you live another 20 years?

[Laughing Gnome]

Actually I'm afraid I disagree with you.

MEWing is a fantastic idea.

So imagine you are in your old age. Sitting in your house worth say £600,000 (agree the value is only worth what someone will pay you). But just accept £600k is the figure.

You reckon you have another 10 years of life. Getting by, only just, financially.

Ho, ho , ho. "Release" 300k, use 100k to pay the monthly debt of £300k over the next 10 years. £200k spare cash. Help out the kids (without attracting the interest of HMRC obviously.

10 years later you peg out.

So what's the score? Well the bank tell the Executors to sell asap to avoid non payments of the £300k MEWed loan.

Say £600k raised, £300k reimbursed to bank and £300k left. Ah yes, what's the IHT limit?

Personally I think this is a winner. Everyone happy except HMRC who cannot collect.

Neat idea. I am sure you will not be the only one to have thought of it.

[winkie]

Neat idea. I am sure you will not be the only one to have thought of it.

...this is quite common practice, borrow money then repay the borrowed money with the borrowed money = money for nothing.