Welcome Guest [Log In] [Register]


Reply
Will Australia become a Capital Exporter?; Mortgage holders have more cash than official figures recognise - money held in offset & redraw not accounted for by ABS
Topic Started: 6 Sep 2013, 08:49 AM (9,751 Views)
Sober
Default APF Avatar


b_b
6 Sep 2013, 11:09 AM
Offset accounts are unique to Australia.
Nonsense. Two minutes on Google shows that they are available, at the very least, in the US, UK, and Canada as well.
Profile "REPLY WITH QUOTE" Go to top
 
skamy
Member Avatar


Sober
6 Sep 2013, 02:03 PM
Nonsense. Two minutes on Google shows that they are available, at the very least, in the US, UK, and Canada as well.
Links please
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Profile "REPLY WITH QUOTE" Go to top
 
b_b
Default APF Avatar


Quote:
 
I wonder if this was CBA? If yest it might explain it, as it sounds like (until now) they didn't have a decent offset facility available, so hardly anyone used the one they had? ANZ, NAB have had better products for some time I think.


It was CBA - could explain a lot.
Shadow
6 Sep 2013, 12:50 PM
b_b
6 Sep 2013, 11:42 AM
But it seems to me a redraw facility actually reduces the notional mortgage (say from $100 to $90). When money is drawn the amount increases again (from $90-$100). Am I right?

I can not see how the RBA would miss this in the aggregates since the asset on the bank balance sheets move from period to period.
Say I have a P&I mortgage that begins with a $500K limit, $500K drawn, and in the first month I'm required to pay $2000 interest plus $100 principal.

Instead I pay $5000 into the mortgage.

Now the mortgage has a $499,900 limit, $497,000 drawn, and a redraw buffer of $2900.

(on a P&I mortgage the loan limit is reduced each month by the required principal repayment - you can't redraw this bit)

I expect the bank will have to report an outstanding mortgage commitment of $499,900, because the extra $2900 buffer could disappear at any time - I could withdraw it tomorrow.
It depends what they report.

If they report commitments - then your example is right.

If they report assets - then the net amount is picked up in the credit aggregates.

It also depends wht source data the debt/asset chart uses. Most of the debt / asset charts I have seen is source the mortgage debt from "B2" from the RBA statitics spreadsheets.
http://www.rba.gov.au/statistics/tables/index.html#overseas

If that is the case, then the data picks up the re-draw facilities, but not the offset accounts.
Edited by b_b, 6 Sep 2013, 02:39 PM.
(S – I) + (T - G) + (M - X) = 0
Profile "REPLY WITH QUOTE" Go to top
 
peter fraser
Member Avatar


Sober
6 Sep 2013, 02:03 PM
b_b
6 Sep 2013, 11:09 AM
Offset accounts are unique to Australia.
Nonsense. Two minutes on Google shows that they are available, at the very least, in the US, UK, and Canada as well.
It does appear to be a late arrival in the USA and the UK - since the GFC.

http://en.wikipedia.org/wiki/Flexible_mortgage

I'm not sure how widespread they would be given that most loans in the USA are fixed. We do have offsets on fixed loans here (Westpac for example) but they are not 100% offsets, so they are less popular.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
b_b
Default APF Avatar


peter fraser
6 Sep 2013, 02:50 PM
Sober
6 Sep 2013, 02:03 PM
b_b
6 Sep 2013, 11:09 AM
Offset accounts are unique to Australia.
Nonsense. Two minutes on Google shows that they are available, at the very least, in the US, UK, and Canada as well.
It does appear to be a late arrival in the USA and the UK - since the GFC.

http://en.wikipedia.org/wiki/Flexible_mortgage

I'm not sure how widespread they would be given that most loans in the USA are fixed. We do have offsets on fixed loans here (Westpac for example) but they are not 100% offsets, so they are less popular.
Read the notes and sources to that wikipedia entry peter - it does not look like offset to me (in the US). It looks like a mortgage accerlator.
Edited by b_b, 6 Sep 2013, 03:20 PM.
(S – I) + (T - G) + (M - X) = 0
Profile "REPLY WITH QUOTE" Go to top
 
Sober
Default APF Avatar


b_b
6 Sep 2013, 03:09 PM
Read the notes and sources to that wikipedia entry peter - it does not look like offset to me (in the US). It looks like a mortgage accerlator.
The concept is similar (excess repayments are set-off against the existing mortgage balance at the "mortgage" rate of interest, unless/until that excess is withdrawn), but the tax treatment is different, in the US. There, the imputed interest income attributed to the "savings" balance is taxable. But that really isn't a problem, as in most cases PPoR mortgage interest is entirely deductible against income in the US. The net result is to the benefit of US taxpayers, compared to the Australian model, but that is a long-standing difference of tax policy. The financial innovation, from a US perspective, of an "Australian mortgage" is to have excess-to-schedule mortgage payments available for withdrawal on a day-to-day transactional basis, instead of as a lump-sum "refinance" of the mortgage.

This is a Canadian version: Manulife One. It is arguable whether it represents "offset" or "redraw" in Australian terms, as there seems to be a "single" account involved (albeit with multiple balances attached), and I'm not certain of the tax treatment ramifications. But again, it shares the same core characteristic of setting off a savings balance vs a mortgage balance for the purpose of calculating net interest due on the latter.

The UK versions are the closest analogues to the Australian ones -- linky .

And again, I found all these through two minutes of searching (in English) on Google. I certainly doubt it is an exhaustive list, on a worldwide basis.
Profile "REPLY WITH QUOTE" Go to top
 
halo
Unregistered

Shadow
6 Sep 2013, 09:44 AM
If people choose to keep their mortgage facility open and save via offset and redraw, rather than closing their mortgage and saving in a traditional savings account, you don't believe this will have any impact of the proportion of homeowners with a mortgage vs outright owners?
It's logical, if they keep the mortgage open they get counted as owner with mortgage, even though they could close the mortgage whenever they want, this is common among my friends, handy to have funds there for emergencies
"REPLY WITH QUOTE" Go to top
 
willy_nilly
Member Avatar
Gold Member
Ok, outright ownership rates have been dropping for longer than offset accounts were available.
It is not rocket science. Easy credit enabled people upgrading their homes to take a mortgage from what was perhaps an outright ownership. The fact that more boomers are heading into retirement in debt is the actual issue.
Offset accounts would make stuff all variance to the outright ownership rates.
Late 1990;s according to wiki for the uptake of offset accounts and when did outright ownership rates start to drop?

http://en.wikipedia.org/wiki/Flexible_mortgage
Edited by willy_nilly, 6 Sep 2013, 06:21 PM.
Profile "REPLY WITH QUOTE" Go to top
 
Simon
Member Avatar


willy_nilly
6 Sep 2013, 06:17 PM
Offset accounts would make stuff all variance to the outright ownership rates
and your evidence of this is where???
willy_nilly
6 Sep 2013, 06:17 PM
Late 1990;s according to wiki for the uptake of offset accounts and when did outright ownership rates start to drop?
also 90s, and redraw was available earlier
Edited by Simon, 6 Sep 2013, 06:25 PM.
Profile "REPLY WITH QUOTE" Go to top
 
willy_nilly
Member Avatar
Gold Member
willy_nilly
6 Sep 2013, 06:17 PM
Ok, outright ownership rates have been dropping for longer than offset accounts were available.
It is not rocket science. Easy credit enabled people upgrading their homes to take a mortgage from what was perhaps an outright ownership. The fact that more boomers are heading into retirement in debt is the actual issue.
Offset accounts would make stuff all variance to the outright ownership rates.
Late 1990;s according to wiki for the uptake of offset accounts and when did outright ownership rates start to drop?

http://en.wikipedia.org/wiki/Flexible_mortgage
48.2% in 1954 as outright owners.
http://www.aph.gov.au/binaries/library/pubs/rp/2008-09/09rp21.pdf
Der! Regardless of how the bank view it, the outright ownership question is a Census question. Those that own says yes and those that have a mortgage say no.
Edited by willy_nilly, 6 Sep 2013, 06:28 PM.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
Create your own social network with a free forum.
Learn More · Sign-up Now
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy