Thursday, January 31, 2008

Last Straw for the Consumer

A while back I suggested that smart homeowners were loading up their HELOCs before the door was shut. Turns out the door is being shut on Monday. Calculted Risk reports that both Chase and Countrywide are placing new limits on how much consumers can borrow.

Without access to Mortgage Equity can the consumer continue. Moreover, consider the on going possibility that high US consumption is being driven by a minority of consumers who have been drawing on heavily on home equity. With the door shut on those high spending consumers we could see a dramatic realignment in the US savings rate and with that a global recession.

12 comments:

Mike said...

Why would a home owner want to take on more debt and possibly put them in a situation where they owe more than their house is worth?

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