The implication is obvious. If mortgages are a major source of new deposits in UK bank accounts (and they are) that source is drying up because fewer loans are being made, whilst net repayments mean cash is being withdrawn from the active economy.
This means that the (wide) money supply is falling – from this impulse at least. Which therefore means we don;t have to raise taxesin order to reduce the money supply and so limit inflation.
Good, innit?
You always have to raise taxes, Timmy.
It’s the Richard Murphy Golden Rule.
Possibly only 12 years late. Pre-2008 annual house transactions were roughly a million a year. Post-2008, 800,000, down by a fifth. Still, depends on the LTV and mortgage amount.
I’m baffled: “mortgages are a major source of new deposits in UK bank accounts”. I’d have thought that mortgages see money flowing out of the bank to lend to you to buy the house. If you argue that the bank needs deposits to let it do that then you’ve broken one of Murphy’s cardinal rules, to wit that banks don’t need deposits they just conjure up the money from thin air.
The bloke from whom you bought the house is likely to clear his outstanding mortgage loan. If he made a surplus beyond that he might deposit it into a bank or he might not.
If he wants to buy a new house, though, … So round and round the money goes.
But what does Murphy mean? Does he mean that people saving up for the deposit on a house typically do so in savings accounts? Is that all: a statement of the bleedin’ obvious?
Dearieme
Did you see his post on typos – just pure comedy gold. Apparently to check his work would ‘reduce the sense of urgency’ on the blog? The mind really does boggle!!
I suppose that he means that as mortgages cover more than 100% of the cost of buying the house, the surplus gets deposited in a bank account.
The Halifax thinks that each of its mortgages is less than 100% of the value# of the house, but what does it know?
#”Value”=fair price excluding stamp duty and transaction costs
What does he mean? It’s impossible to know whether he has a valid point to make, or is, as usual, dribbling randomly on the keyboard. I’m beginning to suspect he’s actually a mis-programmed AI bot.
Not Chat GP, more Chip GP.
Ed P said:
“I’m beginning to suspect he’s actually a mis-programmed AI bot. Not Chat GP, more Chip GP”
More like Chimp I’d say.