Mortgage Equity Withdrawal

Kennyboy66

Loughton_Monkey wrote: »

Spending on services (say gardening) really doesn't have that 'wealth creation' aspect at all, but does of course shift money from one individual to another (generally from an affluent person to a less affluent person, but not always).

No matter how many times Generali has explains this, people just don't get it.

We are the second biggest exporter of services in the world (after the USA) and have consistently had a trade surplus.

The future will be more about selling Financial services, advertising, TV rights and programs, music, design, brands etc, etc to the rest of the world rather than firewood, iron-ware, and cheap tin trays.

HAMISH_MCTAVISH

michaels wrote: »

I fear a side effect is I may end up thanking Hamish's posts

Steady on now....;)

Loughton_Monkey

Kennyboy66 wrote: »

No matter how many times Generali has explains this, people just don't get it.

We are the second biggest exporter of services in the world (after the USA) and have consistently had a trade surplus.

The future will be more about selling Financial services, advertising, TV rights and programs, music, design, brands etc, etc to the rest of the world rather than firewood, iron-ware, and cheap tin trays.

That was clearly not the context of my comments.

Of course the export of [financial] services, tourism etc. is very good for the economy. This has little to do with UK people spending.

I was talking about the concept of our population spending on the 'service industry'. This sector has certainly expanded over the years. Gardening, Car washes, home scratch repairs, tree felling, domestic cleaners/nannies, manicures, pedicures, ........

I find absolutely nothing wrong with these things at all. But they serve only to transfer wealth from UK resident A to UK resident B, on the basis of the latter's labour. Excellent stuff. May even prevent one or two people caliming benefits. But it doesn't serve to make the populace as a whole more wealthy. Just spreads it around - a lot of it 'laundered' through the chancellor who spends it on something else.

chewmylegoff

Wouldn't the number of new mortgages greatly impact the figures - I.e. if "normality" is 1 million new mortgages a year, and then we have five years of only 500,000 new mortgages a year (not to mention falling prices so smaller mortgages over that period) wouldn't we expect to see the level of housing equity withdrawal reducing as there isn't enough new lending to balance the constant repayment of all the existing loans.

Loughton_Monkey

chewmylegoff wrote: »

Wouldn't the number of new mortgages greatly impact the figures - I.e. if "normality" is 1 million new mortgages a year, and then we have five years of only 500,000 new mortgages a year (not to mention falling prices so smaller mortgages over that period) wouldn't we expect to see the level of housing equity withdrawal reducing as there isn't enough new lending to balance the constant repayment of all the existing loans.

True. As I mentioned, the drying up of activity is somewhat behind it.

Official BOE definition is here:

The stock of housing equity can change in three main ways:
1. Changes in the stock of secured lending when households take out or repay debt;
2. Changes in the stock of housing wealth, e.g. when new properties are built or improvements are made to existing properties,
3. Revaluations of the stock of housing wealth due to changes in house prices.

The balance of the first two ways of changing equity, i.e. excluding revaluations, in each period is classed as housing equity withdrawal (HEW).

So to take an extreme, if no-one moves, no-one builds, people just sit tight and repay their mortgages like good little boys and girls, then HEW just remains negative.

Mind you, I can't see how they measure point 2. When I spent £50K+ landscaping my garden, I paid cash. If I'd have got a home improvement loan they would have known, but that would have shown up in 1.

Maybe BOW has 350,000 or so property valuers who tramp the streets all day, noting down the number of drives being re-paved, loft conversions, and extensions. Next door is empty but the new owners have just put in double glazing. I thought I saw some suspicious type wandering up and down our leafy road..... I thought he was surveying the skip for goodies.

grizzly1911

Kennyboy66 wrote: »

We are the second biggest exporter of services in the world (after the USA) and have consistently had a trade surplus.

Can you clarify?

LM kindly posted this yesterday which would suggest we haven't had a surplus for some time (bar a temporary blip).

CLAPTON

Loughton_Monkey wrote: »

That was clearly not the context of my comments.

Of course the export of [financial] services, tourism etc. is very good for the economy. This has little to do with UK people spending.

I was talking about the concept of our population spending on the 'service industry'. This sector has certainly expanded over the years. Gardening, Car washes, home scratch repairs, tree felling, domestic cleaners/nannies, manicures, pedicures, ........

I find absolutely nothing wrong with these things at all. But they serve only to transfer wealth from UK resident A to UK resident B, on the basis of the latter's labour. Excellent stuff. May even prevent one or two people caliming benefits. But it doesn't serve to make the populace as a whole more wealthy. Just spreads it around - a lot of it 'laundered' through the chancellor who spends it on something else.

in what way is there a difference between a UK person tree felling for his neighbour and a UK person building a car for his neighbour or digging coal or smelting iron?

Thrugelmir

Kennyboy66 wrote: »

The cummulative from April 2008 is now £209 billion, not only that but the pace of negative MEW is increasing, with a record £15 bn in Q2 2013.

Most likely reflects the switch from interest only to capital mortgages. Increasing numbers of interest only mortgages are coming to maturity, average currently £55k.
No visible signs that borrowers are overpaying significantly either.

Linton

Loughton_Monkey wrote: »

That was clearly not the context of my comments.

Of course the export of [financial] services, tourism etc. is very good for the economy. This has little to do with UK people spending.

I was talking about the concept of our population spending on the 'service industry'. This sector has certainly expanded over the years. Gardening, Car washes, home scratch repairs, tree felling, domestic cleaners/nannies, manicures, pedicures, ........

I find absolutely nothing wrong with these things at all. But they serve only to transfer wealth from UK resident A to UK resident B, on the basis of the latter's labour. Excellent stuff. May even prevent one or two people caliming benefits. But it doesn't serve to make the populace as a whole more wealthy. Just spreads it around - a lot of it 'laundered' through the chancellor who spends it on something else.

I cant see this at all. Surely all payments for goods or services are simply a transfer of wealth. That's what money is - a mechanism for wealth transfer. A net increase in wealth comes from efficiencies of mass or mechanised production. So if one dog walker can walk 2 peoples' pooches expending the time and effort that each owner previously expended, society as a whole has gained by the extra labour-time available to do other things.

To take another example - why is a barber not "wealth creating" whereas a comb manufacturer presumably is?

michaels

grizzly1911 wrote: »

Can you clarify?

LM kindly posted this yesterday which would suggest we haven't had a surplus for some time (bar a temporary blip).

Nice nominal chart...
...however given the overall goods plus services deficit seems to generally be less than goods deficit I would say this suggests we are running a (considerable) surplus in services which is how I read the post you are commenting on but perhaps you see it differently?