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. 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 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. 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.