The latest tightening of mortgage guidelines after the “subprime” scare is making everyone to bring a little bit more at the closing. The family that would qualify for 0% down now needs to prepay 5%. Those who used to borrow with 5% down now need to put 10% of the purchase price on the table – and so one.

Let assume that the average increase of downpayment is 3% across the board and the estimated mortgage origination for 2007 is $2.4 trillions. That will mean that consumers will put about $70 billion more of downpayments than last year – and those money are taken away directly from consumption – with negative savings rate it is not much that could be taken from savings. It’s about full percentage point of consumption reduction – on top of everything else.