Mortgage Equity Withdrawal in Australia and Britain: Towards a Wealth-fare State?
AbstractAcross the decade to 2007, a combination of house price appreciation and relaxed credit constraints gave a boost to consumption through the mechanism of mortgage equity withdrawal (MEW). Arguably, this kept developed economies buoyant, even through periods of recession. This paper uses panel data on British and Australian homeowners to show that, notwithstanding its macro-economic effects, such borrowing has far-reaching implications for the micro-economy of households. The data indicate that, for the period 2001-2005, equity borrowing was a common tactic. The sums involved were not trivial, were not limited to older cohorts, or the province simply of the rich. In fact, the events and circumstances associated with equity borrowing at the zenith of the last housing cycle were consistent with an insurance, as well as a general consumption, role for MEW. As house prices fall and credit constraints are re-introduced, the options for such borrowing will shrink. Recent financial shocks may, by reducing the availability of a key channel from housing wealth into consumption, prompt a crisis of welfare. They pose challenges for housing and social policy as well as for economic management.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal European Journal of Housing Policy.
Volume (Year): 9 (2009)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.informaworld.com/smpp/title~content=t713700559
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Veronica John Muellbauer & Veronica David M Williams, 2012. "Credit conditions and the real economy: the elephant in the room," BIS Papers chapters, in: Bank for International Settlements (ed.), Property markets and financial stability, volume 64, pages 95-101 Bank for International Settlements.
- Beverley Searle, 2011. "Recession and housing wealth," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(1), pages 33-48, February.
- Dag Einar Sommervoll & Gavin Wood, 2011. "Flips, flops and foreclosures: anatomy of a real estate bubble," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(1), pages 66-85, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty).
If references are entirely missing, you can add them using this form.