Mortgage equity withdrawal
Encyclopedia
In economics
, mortgage equity withdrawal (MEW) is the decision of consumers to borrow money against the real value of their houses. The real value is the current value of the property less any accumulated liabilities (mortgages, loans, etc.) Some authors also use equity extraction and include net payments received at time of house sale. In this case the traditional usage of equity extraction is the purchase of a new house.
The rate of MEW has been linked to Marginal propensity to consume
(MPC), as measured by Personal Consumption Expenditure
(PCE). In the United States, during the dramatic rise in house prices
MEW funded PCE 1.1 to 1.7% from 1991 to 2000, and almost 3% from 2000 to 2005 and was responsible for more than 75% of GDP growth from 2003 to 2006 .
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, mortgage equity withdrawal (MEW) is the decision of consumers to borrow money against the real value of their houses. The real value is the current value of the property less any accumulated liabilities (mortgages, loans, etc.) Some authors also use equity extraction and include net payments received at time of house sale. In this case the traditional usage of equity extraction is the purchase of a new house.
The rate of MEW has been linked to Marginal propensity to consume
Marginal propensity to consume
In economics, the marginal propensity to consume is an empirical metric that quantifies induced consumption, the concept that the increase in personal consumer spending occurs with an increase in disposable income...
(MPC), as measured by Personal Consumption Expenditure
Personal Consumption Expenditure
The Personal Consumption Expenditure is the component statistic for consumption in GDP collected by the BEA. It consists of the actual and imputed expenditures of households and includes data pertaining to durable and non-durable goods, and services. It is essentially a measure of goods and...
(PCE). In the United States, during the dramatic rise in house prices
United States housing bubble
The United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
MEW funded PCE 1.1 to 1.7% from 1991 to 2000, and almost 3% from 2000 to 2005 and was responsible for more than 75% of GDP growth from 2003 to 2006 .