Self-managed super funds have the lowest default rate of any type of loans among the major banks and non-banks, says a Sydney finance broker.
Blue Crane Capital’s managing director Chris Hall (pictured above) said, as a result, non-bank lenders view SMSF lending as a significant opportunity and point of difference in the capital market, boosting loan book growth..
Hall said in the lead up to the 2018 federal election and royal commission into banking, the view was that the commissioner would recommend grandfathering this type of lending.
“As a result, the major banks withdrew their SMSF product – which actually didn't turn out to be the case,” Hall said. “In general, despite the macro-economic pressures and the housing market pull-back, consumers are searching for yield on properties with rentals now starting to catch up to the interest rate rises.”
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Hall said he was mostly seeing business owners wanting to buy commercial premises (within superannuation) and have the trading business rent back to the SMSF (landlord) at market rents.
“The tax incentive and wealth creation strategy, if done correctly, is financially beneficial,” he said.
“We also see a fair bit of residential purchases when it comes to SMSF. The client might have a preference of property rather than managed funds or shares and after speaking with their accountant or financial planner, they request to roll their funds into a new SMSF with the view to purchase a residential property.”
Hall said lenders liked this offering.
“Lenders are starting to offer 70% to 80% LVRs on commercial purchases over 30-year loan terms (traditionally 15 years), which means the clients repayment terms are reduced due to the 30-year offering – similar to a home loan,” he said.
“There are also a host of clients who have legacy SMSF loans with St George and Westpac where the rates have been significantly increased over time. I think there is an opportunity to really help clients into a better product and terms, however keeping in mind you cannot refinance and increase.”
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Hall said he was seeing plenty of enquiries from clients through Blue Crane Capital’s new purpose-built SMSF rate tool, smsfr8.com.au.
“It asks a series of questions which then gives a guide as to what rate your loan should be on against the market,” he said. “Further to this, accountants and financial planners are contacting us to understand how these products work and what the lender appetite is like.”
Hall said SMSF lending could be a confusing space for brokers to work in.
“My advice to brokers is to suggest investigating the ASIC website on SMSF borrowing as a guide to the mechanics and structure of these loans,” he said. “The lenders who provide these products also provide fantastic training and product guides for broker support. However, if it’s not a space you want to play in, speak to your aggregator BDM to maybe pair up with a broker who specialises in SMSF lending.”