Average NSW Australian has paid off their home? Freakout!

[LanceThrustington]

Some background.
Houses are extremely expensive in capitol cities in Australia and have shot up in the last 10 years
Owning a home is the major if not only financial yardstick that Australians measure themselves by. For right or wrong.

Our recent census (gobbermint trying to steal out secrets)
Revealed the usual click bait style news worth stats like "women do more housework", "men get paid more" and "Jedi religion 3rd most followers"

Anyway average age is 38 average age of head of household would be considerably higher (IE the value which is important to exclude children and their home buying habits)

Queue the freakout when in a few states the average household owned their home outright rather than having a huge mortgage.


http://www.news.com.au/finance/real-estate/buying/odd-census-result-for-housing-question-surprises-experts/news-story/9666ed5f3da4e040b023f2498370e636

[marty998]

Old people own everything.

No surprise really - compound interest works better over 50 years than it does over 5.

[AMandM]

The article keeps saying "typical" and "average" when it seems they really mean "single most common response."

“It strikes me as a bit odd,” Mr Oliver said, “that someone could buy a house and have paid off a mortgage by the time they are 38 (the median age for NSW residents).”

He clearly doesn't understand statistics at all. And yet he's the AMP chief economist!

[TheGrimSqueaker]

The article keeps saying "typical" and "average" when it seems they really mean "single most common response."

“It strikes me as a bit odd,” Mr Oliver said, “that someone could buy a house and have paid off a mortgage by the time they are 38 (the median age for NSW residents).”

He clearly doesn't understand statistics at all. And yet he's the AMP chief economist!

The age of 38 is an arithmetic mean whereas a paid-off home is a mode. Both are correctly described as averages but this is a pretty epic example of how they're not the same.

[sol]

The age of 38 is an arithmetic mean whereas a paid-off home is a mode. Both are correctly described as averages but this is a pretty epic example of how they're not the same.

The average age of the (5) people in my household is only 22 years old, and the median earner makes exactly zero dollars per year. 

Apparently we're a family of broke college kids?  Is that how math works?

[jinga nation]

The age of 38 is an arithmetic mean whereas a paid-off home is a mode. Both are correctly described as averages but this is a pretty epic example of how they're not the same.

The average age of the (5) people in my household is only 22 years old, and the median earner makes exactly zero dollars per year. 

Apparently we're a family of broke college kids?  Is that how math works?

And I read it on the internet so it must be true.

[AMandM]

The age of 38 is an arithmetic mean whereas a paid-off home is a mode. Both are correctly described as averages but this is a pretty epic example of how they're not the same.

In fact, the article says that 38 is the median--but your point still stands.
I'm not surprised a reporter doesn't understand the different averages, but the chief economist?  Really?

[sol]

In fact, the article says that 38 is the median--but your point still stands.
I'm not surprised a reporter doesn't understand the different averages, but the chief economist?  Really?

Ooh, even better.  My household's median income is zero and the median age is only 13, and yet we somehow manage to pay our mortgage every month...

[marty998]

Going back to the original topic, ignoring the bad maths for now...

I didn't actually know how to answer this question in the census. I have a mortgage against my home, but it is fully offset, so I have no repayments/interest being incurred.

Do I own my place outright or not?

[HappierAtHome]

Going back to the original topic, ignoring the bad maths for now...

I didn't actually know how to answer this question in the census. I have a mortgage against my home, but it is fully offset, so I have no repayments/interest being incurred.

Do I own my place outright or not?

I'd count it as owning outright.

[deborah]

Maybe we have our own median NSW person!

[AMandM]

Going back to the original topic, ignoring the bad maths for now...

I didn't actually know how to answer this question in the census. I have a mortgage against my home, but it is fully offset, so I have no repayments/interest being incurred.

Do I own my place outright or not?

I'm not sure what it means for a mortgage to be "fully offset." To me it sounds like you get rental income on your house that covers the mortgage payment. I would not count that as owning outright, because the bank could in theory call in the mortgage and you'd have to give up the house (or pay off the balance), right?

[marty998]

Nah an offset account is another Australian invention - our banking system is decades ahead of yours in terms of consumer product innovation.

It's essentially a savings account which "offsets" your mortgage and reduces your interest payable.

Right now I have a mortgage of $250,000, and savings in offset of $250,000. Therefore the balance of the mortgage which is charged interest is ($250 - $250) = $0. If I had $100k in offset, then I'd be charged interest of ($250 - $100) = $150k.

There are a number of advantages -

1) interest rates on mortgages are generally 2-3% higher than interest rates on savings accounts. Putting money in offset effectively means I earn interest at the mortgage rate, not the savings rate
2) interest earned on savings accounts is taxable at marginal rates (39% for me). Interest saved via mortgage offsets is simply less cash outflows/expenses and has not tax implication.
3) Money in offset accounts can be taken out at any time, without having to apply for a redraw or top-up to your loan.
4) Offset accounts are useful down the track if you need to structure loans for future property investments (whole other post required for that).

[TheGrimSqueaker]

Nah an offset account is another Australian invention - our banking system is decades ahead of yours in terms of consumer product innovation.

It's essentially a savings account which "offsets" your mortgage and reduces your interest payable.

Right now I have a mortgage of $250,000, and savings in offset of $250,000. Therefore the balance of the mortgage which is charged interest is ($250 - $250) = $0. If I had $100k in offset, then I'd be charged interest of ($250 - $100) = $150k.

There are a number of advantages -

1) interest rates on mortgages are generally 2-3% higher than interest rates on savings accounts. Putting money in offset effectively means I earn interest at the mortgage rate, not the savings rate
2) interest earned on savings accounts is taxable at marginal rates (39% for me). Interest saved via mortgage offsets is simply less cash outflows/expenses and has not tax implication.
3) Money in offset accounts can be taken out at any time, without having to apply for a redraw or top-up to your loan.
4) Offset accounts are useful down the track if you need to structure loans for future property investments (whole other post required for that).

The US banking system and in fact most of the financial infrastructure is antiquated and mired in the 1950s. Even such basics as how to let customers pay by postdated check is beyond the capability of most businesses and banks. It's impossible for an international visitor to use a credit card to fill up a car at a gas pump, skimmers are everywhere, and debit card transactions aren't real-time. Credit reporting agencies are incapable of recognizing a credit history from another country. Chip enabled cards weren't widely accepted here until they had been standard for more than a decade elsewhere, and then card and reader manufacturers insisted on adding a wireless capability without electronically protecting or encrypting the transmission. Lovely.

[RetiredAt63]

It's impossible for an international visitor to use a credit card to fill up a car at a gas pump, skimmers are everywhere, and debit card transactions aren't real-time.

Well you can, but you have to jump through hoops.  Gas in Vermont - they wanted zip codes for security, and I don't have a zip code.  I asked, for Canadians we have to take the numeric part of my Postal code (Santa's is H0H 0H0* so that would be 000) and add 2 more zeros.  New Hampshire state liquor commission - they have a standard numeric for out of country (I think it was 333?).  But not obvious, not intuitive.

The most shocking ones I heard about US banking are debit cards.  Not real time so the account can go negative.  Allowing a withdrawal even if that will put an account into overdraft.  Here, if I have $4 in my account and I try to debit $4.50, it is refused.


*Yes the North Pole is in Canada, so Santa gets lots of mail with Canada Post, and his elves mail answers back through Canada Post.

[sol]

The most shocking ones I heard about US banking are debit cards.  Not real time so the account can go negative.  Allowing a withdrawal even if that will put an account into overdraft.  Here, if I have $4 in my account and I try to debit $4.50, it is refused.

This is a deliberate design feature, not a bug.  How else can the bank get their $35 overdraft fee?  Of course they COULD deny the charge, but why would they want to?

[cerat0n1a]

This is a deliberate design feature, not a bug.  How else can the bank get their $35 overdraft fee?  Of course they COULD deny the charge, but why would they want to?

Here, they will let a typical customer go into the red up to about £200, and charge a fee for it. So having a system that isn't 60+ years behind the times is no obstacle. Bank accounts in Britain are typically free of charge, so banks have to be a bit more inventive to find excuses to charge something.

I am still chuckling over this. I just find it astonishing that a bank's chief economist would not only be seemingly ignorant of the kind of statistics that is taught to 12 year olds here, but that he would go public in a national newspaper with his ignorance...

[TheGrimSqueaker]

This is a deliberate design feature, not a bug.  How else can the bank get their $35 overdraft fee?  Of course they COULD deny the charge, but why would they want to?

Here, they will let a typical customer go into the red up to about £200, and charge a fee for it. So having a system that isn't 60+ years behind the times is no obstacle. Bank accounts in Britain are typically free of charge, so banks have to be a bit more inventive to find excuses to charge something.

I am still chuckling over this. I just find it astonishing that a bank's chief economist would not only be seemingly ignorant of the kind of statistics that is taught to 12 year olds here, but that he would go public in a national newspaper with his ignorance...

If his education was in economics I can see how it happened. I challenged a university course in economics once after leafing through the textbook and realizing none of the graphs or charts had labels or scales. Leaping to the (somewhat immature) conclusion that the entire field was bullshit, I decided to just spend a couple hours looking at the glossary and then walk in and write the final exam. Which I did, successfully. Immaturity and arrogance can have an up-side.

[The Money Monk]

Going back to the original topic, ignoring the bad maths for now...

I didn't actually know how to answer this question in the census. I have a mortgage against my home, but it is fully offset, so I have no repayments/interest being incurred.

Do I own my place outright or not?

I'd count it as owning outright.

I wouldn't, because he doesn't. He has a lien on it and legally does not have full claim to ownership. He COULD pay it off at any time, but that is not the same thing.

[talltexan]

In fact, the article says that 38 is the median--but your point still stands.
I'm not surprised a reporter doesn't understand the different averages, but the chief economist?  Really?

Ooh, even better.  My household's median income is zero and the median age is only 13, and yet we somehow manage to pay our mortgage every month...

I'm starting to get really concerned about a brewing financial crisis in the Sol household...