Non-bank lenders see surge in refinancing for SMSF loans

Mr Conyngham said there have been some big shifts in the SMSF lending space in the past few years with the major banks losing their appetite for this market.

“We’ve been working with superannuation lending for quite a period of time now, and there have been a series of changes that have happened over that time from people borrowing from their own means, to then using the banks and non-banks over that period,” he said.

“The big four banks have now all walked away from SMSFs for a variety of reasons. However, there are still a number of non-bank lenders still in this space.”

The non-bank lenders, he said, are seeing a significant amount of refinancing at the moment because a lot of SMSF clients falsely believed there were no longer any commercial lenders in this space.

“There has been a lot of commentary around whether it’s still possible to borrow from lenders for SMSF loans. But we are now seeing a lot of refinancing occurring in the marketplace,” he said.

Mr Conyngham said there are some huge discrepancies between the types of rates on offer for these loans, however, so it is important accountants and advisers help their SMSF clients to save money on the loan if they can.  

The vast majority of brokers are now using non-bank lenders over banks, he said, because they are often a lot easier to do business with.

The banks tend to have very strict lending criteria, he said, requiring the fund to have been in place for two years and excluding certain types of properties.

“We’ve been at the opposite end of spectrum in saying, well, if you’ve received the right advice about getting a brand-new SMSF, who are we as a lender to dictate that that advice that you received was incorrect and tell you to wait two years to lend you money,” he said.

“Generally, with the lending we’re seeing, the SMSF client has typically gone and got a lot of advice, and it’s a far different lead time compared to someone who goes and buys the property on the weekend and puts it in their personal name.”

La Trobe Financial is also seeing increased demand for its SMSF loan products following the exodus of banks from this space.

“A number of non-banks have stepped in to fill this void in what is a much sought-after loan product for investors,” said La Trobe Financial chief lending officer Cory Bannister.

The non-bank said it remains committed to providing lending products for SMSFs and intends to grow its market share further.

Mr Bannister said a lot of the fearmongering around SMSF borrowing has been unjustified, with LRBAs proving to be a useful tool for SMSF investors where it is used appropriately.

“That’s why leverage is used widely, but far less transparently, by large superannuation funds. That’s why leverage is used every day by ordinary Australians to purchase their family home,” he said.

“Our experience of SMSF borrowers is that they are prudent and appropriately conservative in their approach to their borrowing, and this reflects in the performance that we see in this part of our portfolio.”