What share of the financed capital gains are spent on consumer goods and services, thereby reducing the saving rate, is uncertain.3 Survey data suggest that approximately a fourth to a third of the value of home equity loans and cash-outs finances personal consumption expenditures directly.44 Another fourth funds repayment of nonmortgage debt that had been used, in effect, as bridge financing, predominantly of personal consumption expenditures.5 Home mortgage debt is thus the final source of funding of some consumer outlays originally financed by extensions of credit card and other consumer debt.
Although there are no comparable surveys of the disposition of equity extracted by sellers of homes beyond amounts applied as a down payment on a subsequent home purchase or outright cash purchases, plausibly they would exhibit similar propensities.