Firstmac Ltd., an Australian lender with about A$5 billion ($4.73 billion) of mortgages, will offer home loans to self-managed superannuation funds, undercutting some local banks amid a central bank warning against a loosening of lending standards.
The non-bank lender, which issued A$11 billion of mortgage-backed debt in the last 10 years, plans to offer SMSFs a 4.99 percent variable rate from today through its website loans.com.au, according to Michael Corkill, a spokesman for the Brisbane, Queensland-based company. Westpac Banking Corp. (WBC) lends to pension funds at a 5.98 percent variable rate, the bank’s website shows.
Households could be taking financial risks by investing retirement funds in property, the Reserve Bank of Australia cautioned in minutes from its Sept. 3 meeting, adding it would closely monitor the development. Australian home prices surged to a record in September, RP Data-Rismark indexes show, as buyers capitalized on record-low interest rates.
“Price bubbles usually occur where there is excessive leverage and speculation,” Marie Mortimer, managing director at loans.com.au, said in an e-mail. “SMSF borrowers typically have a lower loan-to-value ratio and are investing for their retirement, rather than rampant speculation. Low interest rates may cause prices to rise in the future, but it is not currently a problem.” Loans.com.au is an online brand of Firstmac.
SMSFs, which have between one and four members, together managed A$506 billion as at June 30, making them the largest component of Australia’s A$1.6 trillion retirement savings system. SMSFs can borrow to invest in a range of assets including property.
Pension funds that take a A$150,000 loan from Firstmac will pay A$970 upfront to cover legal, valuation and settlement fees, Corkill said. Westpac charges A$1,500, plus legal costs for its SMSF loans, its website shows.
Commonwealth Bank of Australia (CBA) offers home loans to SMSFs borrowing A$200,000 or more at a 6.4 percent variable rate, plus an establishment fee of A$1,600, Tracy Hicks, a company spokeswoman said by e-mail on Oct. 11. Discounts are offered on a case-by-case basis, she said.
Coran Lill, a spokesman for BT Financial Group, Westpac’s wealth management arm, wasn’t immediately able to comment on the bank’s lending rates for SMSFs when contacted last week. Australia & New Zealand Banking Group Ltd. (ANZ) individually assesses loan rates for SMSFs based on the size of the fund and the extent of the relationship with the borrower, Stephen Ries, a spokesman for the bank, said by phone on Oct. 11.
Spokespeople at National Australia Bank Ltd. weren’t immediately able to provide information on lending rates when contacted last week.
To contact the editor responsible for this story: Katrina Nicholas at email@example.com