The Motley Fool has produced an interesting article. It discusses the rise in Mortgage Equity Withdrawal (MEW) over the last decade.
It doesn’t take Einstein to work out that the amount of equity people are taking out of the properties is on the rise, but I have some comments of my own to make.
I’ve always found Economics to be a very interesting subject and to be honest I wish I’d studied it at school. I guess my problem is that, it’s so complicated it can take a lot to get your head around what’s happening and in particular the inter relationships of different parts of the economy. As a ’starters guide’ to the economy I suggest reading David Smith’s informative column in the Sunday Times.
One thing I find interesting is how an economy grows and the measures used to gauge whether an economy is ’stable’. If you look at the 1980s and early 1990s we lived in a period of high inflation and high interest, but that is not to say this wasn’t good for the economy. For a country to grow in comparison to other countries it naturally needs high inflation. It’s common sense that you can’t live in a country where wages increase, but prices don’t. The 80’s saw an increase in production, an increase in Exports and a fundamental increase in business competitiveness as Thatcher’s vision of capitalism took hold.
In contrast we now live in a country with low inflation and low interest, but it’s interesting that the underlying economy probably hasn’t grown. That’s not to say we aren’t content with the country we live in, but it’s interesting nonetheless to ask why we are content. The Stock Market is down; overall production is down, there are more people living here and yet we still feel reasonably happy with our lot.
Perhaps, as the Motley Fool’s article alludes to, this is partly because of the housing boom. Being from a finance type of background I find it interesting that a brick worth whatever 5 years ago can now be worth twice as much. I guess overall this is down to supply and demand and with more people living in the country and it now being more of a norm to live alone I guess there aren’t enough houses. I just find it amazing that the housing boom has been so rapid and so sustained.
