Latest figures released by the Bank Of England show the continuing efforts being made by households to pay down debt. Housing Equity Withdrawal (HEW) in Q3 was £8bn.
HEW is the amount of money borrowed against property but not used for the purchase of property – it is an important if overlooked barometer of the High Street and wider economy and shows the contribution made by the housing market to the wider economy.
Here’s why;- For much of the late 1990’s and the early 2000’s people borrowed money against the rising value of their homes and spent this money in the High Street – on white goods, home improvements, investments in new businesses, new cars even on holidays. What economists might call ‘discretionary spending’. This spending peaked in 2004 with £16B borrowed in one quarter alone.
The credit crunch encouraged consumers to become more prudent and whilst the Government continues to print money it doesn’t have in an attempt to stimulate the economy the the fiscal fright many people had after the collapse of Northern Rock and the austerity measures introduced by the coalition government has convinced them that they need to be saving rather than spending.
The Chancellor has been caught trying to persuade us to go out and spend whilst all the while sporting the latest fashion look for politicians stolling along the edge of a fiscal cliff – an obligatory Hair Shirt!