Recession and Housing Wealth

The role of housing wealth is changing on a global scale. Innovative mortgage products have made housing wealth increasingly available to home owners across the life-course through the mechanism of equity borrowing. This change, however, has happened through a period of relative economic stability, when home prices have continually risen and home owners feel confident that any equity cashed-out today, can be recouped tomorrow. But what happens when this safe economic environment is shaken to the core, and home owners are at even greater risk of economic shocks and a financial straightjacket that will put greater restrictions on mortgage re-financing opportunities?

Much attention has been paid to the macro-economic implications of the (housing) financial crisis of 2007 which rippled across much of the developed world. However, relatively less attention has been given to the micro-economic implications ? particularly household?s management of mortgage debt; the finances at the heart of the ?credit crunch? - and its broader implications for the welfare of home owners. This paper builds on a line of argument developed elsewhere and looks at the micro-economic consequences of recession on household?s living standards and management of housing debt.