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Housing Equity Withdrawal Stats From The Boe

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No, they are seeing some sense...they can see that debt costs no matter how you look at it...they are making themselves richer by paying down debt and growing net worth.......stagnant markets = higher equity pays. ;)

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Very difficult to tell by the timescale on that chart.

In the public's mind, sentiment re the general economic situation is much worse now than it was as the start of the year IMO.

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There was a downward trend again going into the coalition budget when lots of cuts were expected. All they did was increase spending. Then in November the government ordered the FSA to stop getting any silly ideas about restricting mortgage lending.

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CHART1.gif

Are we heading back to positive territory?

Inflation leaving people with less cash to pay down mortgage and also switch to interest only during the squeeze (or by clever financial planning)

and hence the smaller -ve number.

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Why pay off your mortgage when the BoE is doing it for you with inflation ? May as well go on that holiday you've promised yourself

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Why pay off your mortgage when the BoE is doing it for you with inflation ? May as well go on that holiday you've promised yourself

I have to agree with this.

It's not worth saving anything at the moment as the rates are crap. And not worth repaying a mortgage when:

1. If you're made redundant the gov will cover it.

2. The interest rate is so low

3. The actually value of money is dropping so fast.

The thing to do with money at the moment is to just spunk it all up today and enjoy yourself. Especially if you're a home owner with a high enough LTV that you're not going to get caught in -ve eq any time soon.

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Housing Equity Withdrawal (HEW) is very much misunderstood by most commentators in the media, and more often than not HEW is interpreted very simplistically as follows:

Positive HEW = households extracting equity from their homes via mortgage borrowing

Negative HEW = households paying down mortgage debt

Quite likely the reason the Bank of England changed the name of this metric to Housing Equity Withdrawal from the original Mortgage Equity Withdrawal was to try to combat the misinterpretation of numbers that was occurring, but it doesn't seem to have worked. Ever since HEW went negative, the press headlines have been that homeowners are taking the opportunity of this period of low interest rates to pay down their mortgage debt, even though there is no real evidence for this.

There is some analysis of HEW in the latest BoE Quarterly Bulletin, and this is the introduction:

"The amount of housing equity withdrawal (HEW) has swung from being significantly positive before

the financial crisis and recession, to negative over the past few years. The net effect of a chain of

housing transactions is typically a large equity withdrawal. The fall in the number of housing

transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the

financial crisis. There is little sign that, at the aggregate level, households are making an active

effort to pay down debt more quickly than in the past."

Housing equity withdrawal since the financial crisis (PDF)

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Housing Equity Withdrawal (HEW) is very much misunderstood by most commentators in the media, and more often than not HEW is interpreted very simplistically as follows:

Positive HEW = households extracting equity from their homes via mortgage borrowing

Negative HEW = households paying down mortgage debt

Quite likely the reason the Bank of England changed the name of this metric to Housing Equity Withdrawal from the original Mortgage Equity Withdrawal was to try to combat the misinterpretation of numbers that was occurring, but it doesn't seem to have worked. Ever since HEW went negative, the press headlines have been that homeowners are taking the opportunity of this period of low interest rates to pay down their mortgage debt, even though there is no real evidence for this.

There is some analysis of HEW in the latest BoE Quarterly Bulletin, and this is the introduction:

"The amount of housing equity withdrawal (HEW) has swung from being significantly positive before

the financial crisis and recession, to negative over the past few years. The net effect of a chain of

housing transactions is typically a large equity withdrawal. The fall in the number of housing

transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the

financial crisis. There is little sign that, at the aggregate level, households are making an active

effort to pay down debt more quickly than in the past."

Housing equity withdrawal since the financial crisis (PDF)

I think they are more likely trying to pay down high unsecured loans and credit cards......or taking on less debt and trying to live within their means......if they have achieved all that and still have cash to spare paying down HEW if on a rate that is higher than a savings rate is not a bad idea.....if not spend the cash and keep the debt........but you need an income to service any kind of debt....the more debt you have the more income you need. ;)

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Why pay off your mortgage when the BoE is doing it for you with inflation ? May as well go on that holiday you've promised yourself

The only type of inflation that pays off your mortgage is wage inflation surely? Any other inflation makes your mortgage payments harder or you might even have to reduce your payments

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Housing Equity Withdrawal (HEW) is very much misunderstood by most commentators in the media, and more often than not HEW is interpreted very simplistically as follows:

Positive HEW = households extracting equity from their homes via mortgage borrowing

Negative HEW = households paying down mortgage debt

Quite likely the reason the Bank of England changed the name of this metric to Housing Equity Withdrawal from the original Mortgage Equity Withdrawal was to try to combat the misinterpretation of numbers that was occurring, but it doesn't seem to have worked. Ever since HEW went negative, the press headlines have been that homeowners are taking the opportunity of this period of low interest rates to pay down their mortgage debt, even though there is no real evidence for this.

There is some analysis of HEW in the latest BoE Quarterly Bulletin, and this is the introduction:

"The amount of housing equity withdrawal (HEW) has swung from being significantly positive before

the financial crisis and recession, to negative over the past few years. The net effect of a chain of

housing transactions is typically a large equity withdrawal. The fall in the number of housing

transactions is therefore likely to have been a key driver of the fall in equity withdrawal since the

financial crisis. There is little sign that, at the aggregate level, households are making an active

effort to pay down debt more quickly than in the past."

Housing equity withdrawal since the financial crisis (PDF)

Good stuff, thanks. Often hear about people wishing to improve their homes rather than move in the current climate, but this only affects HEW if the funds used are not secured debt.

The conclusion in the link:

Conclusion

The calculations of the gross flows underlying HEW presented

in this article suggest that the weakness in housing market

transactions is likely to have been the key driver of the move

from equity withdrawals to equity injections. Fewer

homeowners trading down and selling a property without

buying another mean that a large source of equity withdrawal

has disappeared. Flows of injections have changed little over

the period. So the move to injections does not by itself

suggest that the household sector as a whole is paying down

debt more rapidly than in the past.

Edited by cheeznbreed

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CHART1.gif

Are we heading back to positive territory?

whats mad about this graph is its back to front... positive territory is more people in the UK mewing and taking equity out of there homes, negative territory is people paying down mortages. IMHO negative territory is a more sensible place to be

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whats mad about this graph is its back to front... positive territory is more people in the UK mewing and taking equity out of there homes, negative territory is people paying down mortages. IMHO negative territory is a more sensible place to be

negative territory is predominantly the result of failed property chains, not repayments (well, anymore than usual).

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  • 276 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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