Lending to trustees of self-manage superannuation funds to finance investments grew by 12 per cent over the past 12 months and has turned into a sizeable segment of the loan market. But SMSF lending remains a niche product offering.
According to the latest Australian Taxation Office SMSF statistical report, limited recourse borrowing arrangements were worth A$56.9 billion in the June quarter – up from $50.3 billion in the June quarter last year.
Total LRBA balances are around a third total personal credit balances, as reported by the Reserve Bank.
While there are any number of personal loan, car loan and credit card providers fighting it out over a shrinking market, comparison sites list only a small number of SMSF lenders.
Finder.com.au lists Liberty Financial, Mortgage House, Reduce Home Loans, La Trobe Financial, Switzer Home Loans, loans.com.au and FreedomLend.
Among the big banks, NAB appears to be the only one with an SMSF loan (a margin loan for SMSFs). Macquarie also has a loan, as does Columbus Capital (which lends through the wholesaler Origin Mortgage Management).
Some lenders steer clear of the SMSF loan market because it is relatively complex and has been controversial (it was Labor policy at one stage to ban LRBAs).
However, lenders in the market say SMSF trustees make good borrowers. Last year Columbus Capital made an issue of residential mortgage-backed securities made up entirely of mortgage loans to self-managed superannuation funds.
Columbus Capital’s treasurer David Carroll said SMSF loans have very low levels of arrears and hardship applications.