Why Not Cash Out Home Equity? Reflections on the Finnish Case

Abstract

Recently, many governments have sought ways to secure the provision of an adequate level of income for their ageing populations. The notion that citizens themselves should provide a part of their future livelihood is gaining ground in European societies. One possibility is to apply the wealth that individuals have accumulated during their lives. An owner-occupied dwelling is the largest piece of wealth that ordinary households possess. It constitutes an asset that households can transform into money. Banks have developed various financial instruments for households to transform their housing equity into money. However, housing is not a comparable asset to financial investments, such as stocks or shares. Homes have a special meaning for individuals, and this makes a dwelling a special good that cannot be traded at will. This article is based on a qualitative interview study conducted in Finland. We will examine how Finnish homeowners justify their generally negative attitudes towards using housing equity. One of the issues that households face is that by employing financial instruments, they would be remortgaging a debt-free house, and homeowners would find this undesirable. Is there a specific moral aversion to debt? Is the owner-occupied house a “sacred” possession that cannot be cashed out?