Housing Equity Withdrawal -£8.1 billion - good news or bad?

The Bank of England estimate for Housing Equity Withdrawal for the first quarter of 2009 is -£8.1 billion. The negative figure implies that individuals injected a net total of £8.1 billion into housing equity in the first quarter. The revised estimate for 2008 Q4 is a net injection into housing equity of £7.8 billion.

As a percentage of post tax income, the first quarter figure was equivalent to 3.5% of post tax income and 3.2% in the prior quarter. Compared to the first quarter of 2008, the impact is a fall of -4% in the “adjusted income effect”. ie Post tax income plus HEW.

Is the trend in HEW good news or bad news for the economy? For those who are looking for an improvement in the savings ratio and a reduction in spending as a proportion of GDP within the economy, the trend in HEW is goods news. The impact on the balance of payments will be to ameliorate the position as the cyclical slow down impacts on adjusted incomes, consumer spending and the deficit.

Those with concerns for the economy, the length of the recession and the Government Borrowing plans will take less comfort from the reversal. Be careful that for which you wish.

Bank of England : Housing Equity Withdrawal Q1 2009

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