Tags: home mortgages

So, to revisit my “Home ATM is out of order” post, I think that while subprime mortgages have been getting a lot of attention with regard to the Great Financial Crisis, the problem we have here in Oz is more to do with all debt and how our whole economy has become dependent on spending more than we earn. Mining home mortgages for their equity, because house prices always rise, don’t they? has been a very popular way to do this for people who are relatively well-paid and settled, but it can’t go on forever. What happens when it stops?

Where did those home equity loans and lines of credit go? Irvine Renter points out that the situation went really toxic when people realised that they could take out money, not just for renovations – which would then increase the house’s value – but for consumer spending. Boats, cars, holidays, that kind of thing. But I can see that many people who would balk at spending on these kinds of things might consider using their home equity for something they consider more important, more reasonable, more of an investment.

Back in the Australian context, I’m wondering how many households have been mining their home equity for education.

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