SMSF property lending tiny, says Westpac

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From Banking Day:

The self-managed superannuation loan market is worth A$6 billion to $7 billion, with about 30,000 funds currently borrowing to buy property, according to Westpac.

The head of the SMSF trustee division at Westpac, Sinclair Taylor, said Westpac and St George had a combined SMSF loan book of around $2 billion, giving it a big market share.

The group’s average loan size is around $300,000 and the maximum loan-to-valuation ratio is 80 per cent.

Speaking at an SMSF Professionals’ Association of Australia conference in Sydney yesterday, Taylor said he expected demand to increase.

Taylor said: “As cash rates come off and equities remain volatile, a lot of trustees are looking for the security of property. That is what they tell us when they come in to talk about a loan.

“We are also seeing more brokers selling the product. There is very strong growth in applications from mortgage brokers.”

That’s under half a percent of total mortgage debt. Over the three years period since the rule changes allowed leverage in SMSFs, we’ve added about $190 billion to aggregate mortgage debt so SMSF represents 3.5% of new lending over that period.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.