If this big run up in debt was not used to finance a surge in spending, where did it all go? The answer to this question lies in developments within the housing market. House prices trebled in the ten years to 2007. And mortgage debts were accumulated to pay for the housing that had become so much more expensive. The conventional wisdom that the sharp increase in household debt was associated with the house price boom of the past decade is well founded. But what is less often appreciated is that much of that rise in household debt was matched by a comparable increase in the value of financial assets held by households. The value of housing assets purchased by households did increase, through additions and improvements to the housing stock. But the main counterpart to the rise in borrowing was increased saving. To make this point more concretely: while households accumulated an additional £ of debt between 2000 and 2008, they also acquired over £ billion of financial assets over the same period. 2 What was going on? To caricature things only a little, older households (or rather those trading down within the housing market) benefited from selling homes at much higher values. They were the winners. The big losers were younger households (or those trading up), paying more for those houses and accumulating higher debts. The money borrowed by young families ended up in the bank accounts of older households. That money wasn’t used to fuel a spending boom.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at the CBI Northern Ireland Mid-Winter Dinner, Belfast, 22 January 2013. *  *  *  I am delighted to be in Belfast to deliver my final regional speech as Governor. After the Bank obtained independence in 1997, we decided to establish a physical presence in Northern Ireland for the first time. And I was able to announce the opening of the Agency when I visited Belfast in May 1999. Since then the links between the business community and the Agency have gone from strength to strength. None of this would have been possible without the commitment of a remarkable group of Bank of England Agents: first, Nigel Falls, then Phil Eckersley and now Frances Hill, all supported by Gillian Anderson, today the Deputy Agent. During that same visit, I met with a group of politicians from right across the political spectrum. They were surprisingly eager to talk with, not at, each other – because they wanted to exchange views about the economic future of Northern Ireland, and to get away, at least for a while, from the divisive nature of daily politics. You would have been hard put to identify the affiliation of those politicians from their views on how to promote economic prosperity in Northern Ireland. And this is the key to the future.