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Home > Statistics > Explanatory Notes - The Bank's Estimate of Housing Equity Withdrawal
 

Explanatory Notes - The Bank's Estimate of Housing Equity Withdrawal

This was previously called Mortgage Equity Withdrawal.

OVERVIEW
AVAILABILITY
SOURCES
DEFINITIONS
VALUATION AND BREAKS
FURTHER INFORMATION


OVERVIEW

The stock of housing equity is the proportion of housing wealth which does not have lending secured on it. In other words, the stock of housing equity equals the stock of housing wealth minus the stock of lending secured on housing. 

back to topThe 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).

When households, in aggregate, are withdrawing more equity than they are injecting, HEW is positive. When they are injecting more than they are withdrawing, HEW is negative.

For a more practical interpretation of these concepts, please refer to an article in the 2011 Q2 Quarterly Bulletin. The article explains that a move to housing equity injections is likely to reflect the weakness in withdrawals related to housing market turnover, with little sign that households in aggregate are making an active effort to pay down debt more quickly than in the past.back to top


AVAILABILITY

Data are available quarterly from 1970 Q1, both not seasonally adjusted and seasonally adjusted.  Publication of data will usually occur on the 4th working day following the release of National Accounts data from the Office for National Statistics or subject to the published schedule of releases

These data are available on the Interactive Database.

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SOURCES

HEW includes series published in the Bank’s Bankstats (Monetary and Financial Statistics) and statistics published by the Office for National Statistics available on their website www.statistics.gov.uk.  

All data are subject to revision if and when new information becomes available.  For more information on revisions practices see the Explanatory Note on revisions, available here. The data for net lending secured on dwellings (VTVG) will always be the data published at the time of the most recent publication of Table A5.3 in Bankstats (Monetary and Financial Statistics).back to top


DEFINITIONS

HEW occurs when withdrawals of housing equity by the household sector are larger than injections of equity.

In practice, HEW summarises the net effect of many different ways in which individual households might inject or withdraw housing equity. For example, a homeowner might take out a further advance on their mortgage and so withdraw housing equity. Another homeowner might make improvements to their home and so inject housing equity.

The Bank estimates HEW by taking the difference between net lending secured on dwellings and households’ gross investment in housing.  Investment comprises new houses, home improvements, transfers of houses between sectors, and house moving costs, such as stamp duty and legal fees (although these fees do not add to the value of the housing stock, they are measured as investment, so reduce the funds available for consumption). 

HEW is measured as shown in Table 1 before:

Table 1

Series Code Source
+ Net lending secured on dwellings VTVG.Q (1) BoE: Bankstats (Monetary and Financial Statistics)
+ Capital grants to personal sector ADCE.Q ONS
+ Capital grants to housing associations GTDI.Q ONS
- Household & NPISH investment investment in dwellingsexcluding land DLWK.Q (2) ONS: Blue Book (Table SUP1)
- Household net purchases of land (Table A41) NSSY.Q (2) ONS: United Kingdom Economic Accounts
- Household & NPISH costs associated with the transfer of ownership of non-produced assets DLXV.Q (2) ONS: Blue Book (Table SUP1)

 

(1) Prior to 1990 the ONS series AAPR.Q is used.
(2) From 1989.  Between 1986 and 1989 the sum of these is estimated from Household sector gross fixed capital formation (NSSU.Q) and, prior to 1986, from Personal sector gross fixed capital formation. 


The table above shows the identifiers for the series used.  The HEW series is then seasonally adjusted using X-12-ARIMA. 


VALUATION AND BREAKS

From March 1999, VTVG.Q includes enhancements due to other specialist lenders’ secured lending data to include lending to housing associations.

From 1990, Net lending secured on dwellings (BoE series code VTVG.Q) replaced the comparable ONS series (ONS series code AAPR.Q).

For further information on valuation and breaks in the VTVG.Q series, please refer to the Explanatory Notes for Total Lending to Individuals.

Between 1986 and 1989 the sum of household investment in dwellings, household net purchases of land and household cost associated with the transfer of ownership of non-produced assets is estimated from household sector gross fixed capital formation (ONS series code NSSU.Q).  Prior to 1986 these series were estimated from personal sector gross fixed capital formation.  From 1989 the series listed in Table 1 of these notes are used. 

Series GTDI is calculated from data recorded by the Department for Communities and Local Government and the National Assembly for Wales for investment grants in housing associations.

Series DLWK and DLXV are produced by the Capital Branch at the ONS. These series are comprised of “new dwellings plus improvements by housing associations, householders or landlords”. They are a combination of survey data from household expenditure, private sector capital expenditure and construction plus standard VAT rates.

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FURTHER INFORMATION

Reinold, K (2011), ‘Housing equity withdrawal since the financial crisis’, Bank of England Quarterly Bulletin, 2011 Q2, Pages 127-133

Benito, A and Power, J (2004), Housing equity and consumption: insights from the Survey of English Housing' Bank of England Quarterly Bulletin, Autumn, pages 302-309.

Bank of England (2004) Mortgage equity withdrawal and consumption: new survey evidence, Inflation Report, August 2004, pages 10-11.

Davey, M (2001), ‘
Mortgage equity withdrawal and consumption' Bank of England Quarterly Bulletin, Spring, pages 100-103.

Bank of England
(1999) ‘Mortgage equity withdrawal', Inflation Report, November, page 6.

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