House Prices, Borrowing Against Home Equity, and Consumer Expenditures

Download or read book House Prices, Borrowing Against Home Equity, and Consumer Expenditures written by and published by . This book was released on 2003 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the link between house prices, borrowing against home equity, and consumer spending in Canada in recent years. Borrowing against home equity, or home equity withdrawal, means turning home equity into financial capital through borrowing, without selling the home. The main objectives of this research project were to investigate the different sources of data on refinancing in Canada and examine the effect of changes in house prices on consumer expenditures through borrowing against home equity and in total, through the wealth effect. The study concludes that borrowing against home equity is more common than it used to be, both through refinancing of mortgages with a cash-out and through home equity loans and lines of credit. The paper presents two estimates of borrowing against home equity that have been produced in Canada. However, it found that they do not agree. The paper highlights the lack of data and inconclusive econometric work to date to measure the size and significance of home equity borrowing in Canada. It considers how home equity withdrawal can be monitored and analyzed and underlines that further analysis of the link between house prices and consumer expenditures through borrowing against home equity is not possible without more information through surveys and enhanced reporting by financial institutions.