Here is another reason why first quarter GDP turned violently negative. Home owners paid back record amounts of their home equity and mortgage loans. During the first three months of this year, the payback amounted to 3.5 percent of post tax income. A cool ₤8 billion was repaid to the banks.
Before the crash, home equity withdrawal was the engine of the UK economy. House prices went up, home equity increased and banks handed out loans to anyone who owned a home. These loans financed a consumption binge which kept taxes high and the rest of us in employment.
House prices are again picking up, and as they do, home owners gain equity, allowing them to take out loans. If prices fully recover, then the bubble back on. Banks can turn the tap back on and we can return to the good old days of asset appreciation and a consumption loaded lifestyle built on debt.
Bring it on; I can't wait.