Gottiboff today:
Lurking behind the decision by Westpac and other big banks to stop lending to self-managed superannuation funds is a property racket that threatens significant losses to those who were caught.
…This is how the scam worked. There are a huge number of unsold, used and new small inner city apartments that sellers are desperate to get rid of. They engaged a series of real estate sales people on truly enormous commissions to sell the apartments at inflated prices. The sales people were linked to people who would set up self-managed funds (or use existing ones) and arrange the borrowings. Melbourne was the home of many of the scams but they existed in Sydney and Brisbane. Most apartments were sold above the top of the markets and they have fallen at least 20 to 25 per cent in value. And if the unfortunate self-managed fund beneficiary bought an apartment in Melbourne that was cladded in flammable material the fall might be 50 per cent or greater — if they can find a buyer at all.
Well, gee, hoocoodanode. And just to remind you of Westpac, via the AFR:
Westpac is set to rock the increasingly nervous property market by withdrawing new loan offers to self-managed superannuation funds looking to invest in property.
…The move has shocked mortgage brokers and financial advisers, who act as intermediaries between borrowers and the banks, but complements a change in lending strategy the banks have rolled out in recent weeks.
…”We continually review our products and services to ensure they meet the requirements of our customers,” a Westpac spokesman said.
“In order to simplify and streamline our self-managed super fund products, we will be withdrawing from sale our SMSF home loan product and business lending to SMSFs, effective Tuesday 31 July 2018.”
A billion here and billion there and pretty soon you’re talking serious money. More at Banking Day:
The withdrawal from SMSF lending applies across the group’s regional banking subsidiaries, after St George last week announced its intention to abandon the controversial lending activity.
Westpac’s exit follows damning evidence presented to the Hayne Inquiry in April, which revealed how one of its financial planners advised a client with $200,000 in an industry fund account to set up an SMSF, sell her home and take out a loan to buy a million dollar investment property.
A Westpac group spokesman did not indicate whether the decision was linked to the royal commission hearings, saying only the withdrawal would “simplify and streamline our self-managed super fund products”.
…Westpac is also tightening the terms of loan agreements that will apply to its existing portfolio of SMSF borrowers.
…Also, borrowers will no longer be able to extend their interest-only periods when their contracted period expires.
Westpac’s exit means Commonwealth Bank will be the only major institution lending to SMSFs after July 31.
Wow. The end of IO in all SMSFs. There’s some pants pooing right there. Westpac has been the last chance Larry on investor loans:
No more.
