Demand for SMSF loans remains steady amid economic downturn
Despite the recent impact of COVID-19 on property markets, non-bank lenders continue to see steady demand for SMSF loan products, with some trustees looking to take advantage of lower property prices.
Thinktank director Per Amundsen said despite ATO data suggesting a levelling off in the number of new LRBAs after years of strong growth, non-bank lender Thinktank is continuing to see a consistent increase in demand for SMSF loan products as members search for more attractive investment options.
“The volatility and increased uncertainty attached to equities in the current climate and the low yields on bonds and term deposits has been leading people to actively consider other asset classes,” Mr Amundsen said.
Mr Amundsen said while the growth in SMSF loans may not be “spectacular” over the next few years, he does expect it to remain ongoing and steady.
“It remains an area of significant activity and opportunity for brokers and their clients in both commercial and residential property,” he said.
Mortgage Ezy managing director of operations Joanna James agrees that SMSF loans "have stood firm in these more uncertain times".
"Like anything, COVID has brought unprecedented uncertainty and no one can say for sure that SMSF lending is immune, however its robust and diverse nature indicates that it has the ability to weather the storm," said Ms James.
Beyond the general adjustment that all lending has needed to make with new ways of looking at VOI, valuations and mortgage documentation, demand, she says, has remained strong.
Mortgage Ezy, she says, is currently seeing a lot of demand from customers looking to refinance as they look for better rates.
Rocco Massaria, the managing director of non-bank lender Your Manager, said he has also seen a comeback with these types of loans, with clients looking for opportunities with lower property prices. Commercial SMSF lending, in particular, has “definitely picked up”, he said.
“With many majors no longer offering SMSF loans and locking in clients in high rates, brokers are looking to save clients’ money with the lower rates and features,” he said.
Some of the regulatory changes impacting related-party loans in recent years have also seen a renewed interest in commercial lenders providing SMSF loans, according to Mr Amundsen.
“The clear benefit from a fund member’s point of view is that by refinancing to an unrelated party via an LRBA, they end up releasing funds outside their SMSF to invest in other assets or apply to other purposes such as working capital in their business,” he explained.
“As long as the right advice has been relied upon and the required documentation correctly set up and executed, ensuring all associated regulations have been observed, there is no more involved than for a standard property purchase via LRBA and in fact can often be easier because of the investment track record that exists.”
Mr Amundsen said Thinktank has seen quite a lot of activity in this area over the last year or two as financial advisers and trustees have become “increasingly proactive as they look to optimise their combined SMSF, personal and business arrangements”.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.