Will Dunning, Chief Economist for the Canadian Association of Accredited Mortgage Professionals (CAAMP), of which I am a member, wrote an article for the Mortgage Journal called “Keep an Eye on Wealth Effects”.
What is the ‘Wealth Effect’?
It’s really all about perception…. our perception of wealth, particularly with respect to the value of our homes and equity portfolios.
As these grow, we get an increased sense of being better off financially.
True? Perhaps, but the money is not in the bank.
We tend to see this growth as another form of income. And even though we don’t receive that income per se, we sometimes begin to act as if we do.
Thus we may well reduce the amount we save, or even borrow more; and we increase our spending.
For more on how the “Wealth Effect” impacts us and our economy, click here: WEALTH EFFECT
