Self-Managed Superannuation Funds (SMSFs) have gained popularity in Australia as a way for individuals to take direct control of their retirement savings. SMSFs allow investors to manage their own superannuation and make direct investments, including in property.
However, the landscape of SMSF lending has undergone significant changes in recent years, particularly with the exit of major lenders from the market.
Banks such as Commonwealth Bank, Westpac, and NAB have completely withdrawn from offering SMSF loans. Several factors have driven this retreat.
Firstly, regulatory scrutiny has intensified, with the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) tightening lending standards to ensure the financial stability of the superannuation system.
Secondly, the complexity and risks associated with SMSF loans have made them less attractive for banks. Unlike traditional home loans, SMSF loans often require more stringent compliance and management, increasing administrative costs and potential liabilities for lenders.
Consequently, lenders who exited the SMSF market and are grandfathering these products have significantly increased their rates compared to current market offerings.
One of our clients recently refinanced an SMSF loan originally held with a major lender, reducing their interest rate from over 10% to 7.34% with a new lender. This adjustment resulted in net savings of over $15,000 in the first year, after accounting for fees.
Clients with older SMSF loans from major lenders may find it beneficial to explore refinancing opportunities.
Written by Ross Ung
With a passion for the property, real estate and financial services sectors, my career saw me working as a Business Analyst for multiple firms before joining Smartmove as a Mortgage & Finance Advisor in 2020. With a range of experience in both Accounting and Property Finance, I look forward to bringing this varied experience to help clients achieve their property and finance goals.
