The recent Flow of Funds report showed that household mortgages increased $220.3 Billion in Q2 2006, and $436.4 Billion for the first half of 2006. Using a simple formulation(1) for Mortgage Equity Withdrawal (MEW), MEW was $81.6 Billion in Q2 2006. This is substantially below the record $180.1 Billion of MEW in Q3 2005.

The first graph shows quarterly MEW as a percent of GDP for the last 30 years. There is substantial quarterly variability in MEW, but it appears MEW has fallen, as a percent of GDP, from the levels of the last few years.

Using Greenspan’s estimate of approximately 50% of MEW flowing through to personal consumption expenditures, it is possible to estimate the impact of MEW on GDP

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