Summary: US mortgage equity withdrawal has picked up – but the scope for more isn’t there

What the chart shows: The chart shows mortgage equity withdrawal as a share of the change in personal disposable income

Why the chart is important: In 1957, US households’ equity in their houses was three times the value of their mortgages. As recently as 1989, it was twice as much. By Q1 2009, the value of the mortgages was close to twice the equity. Since then, by dint of furious deleveraging, US households have restored parity between mortgages and homeowners’ equity. In recent quarters, they have taken to withdrawing some equity from housing in order to underpin spending. But, the scope to do so on a pre-crisis scale – when mortgage equity withdrawal could reach up to 10% of the change in disposable income – is no longer there. This means that US consumption will depend on the actual change in household incomes, with some input form a pure wealth effect. Given the current weakness of US income growth, this means that the American recovery, while continuing, will remain sluggish.