Mortgage Equity Withdrawal

DEFINITION of 'Mortgage Equity Withdrawal'

The amount of equity that consumers withdraw from their homes through home equity loans or lines of credit and cash-out refinances. Mortgage equity withdrawal is a relevant variable in the prediction of consumer spending and, therefore, gross domestic product (GDP). This statistic is often expressed as a percentage.

BREAKING DOWN 'Mortgage Equity Withdrawal'

Mortgage equity withdrawal is cyclical, and varies based on rising home prices and, to some degree, the overall level of interest rates. An interesting feature of mortgage equity withdrawal in applying it to economic forecasting is calculating what percentage of the total equity withdrawal goes directly into consumer spending and what percentage is used to pay down existing consumer debt. Mortgage lenders market loans heavily to consumers for both reasons. Another interesting feature of mortgage equity withdrawal in applying it to economic forecasting is that consumers do not generally spend all of their withdrawals at one time.

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