Commercial property lender ThinkTank is expanding its self-managed superannuation fund lending business, aiming to fill the gap left by the big banks exiting the market.
Last month, Macquarie Bank notified brokers that it will stop offering SMSF limited recourse borrowing arrangements at the end of April. Macquarie said it was “streamling” its mortgage offerings.
Westpac, AMP Bank and Commonwealth Bank all stopped offering LRBAs last year, while NAB got out in 2015 and ANZ never offered the product.
Comparison site Finder.com.au lists only two providers of SMSF loans – Liberty Financial and Yellow Brick Road. Canstar lists Yellow Brick Road, Mortgage House and Hume Bank.
ThinkTank has been doing SMSF lending for commercial property acquisition for the past five years.
Now it is moving into residential property SMSF lending, which is a different product because it is a different security.
ThinkTank chief executive Jonathan Street says the company has originated $170 million of SMSF loans. He says the loans have low loan-to-valuation ratios and terms are all principal and interest
Street says: “We have zero arrears and zero losses in that portfolio. You can’t get a better performing set of loans.
“Based on our experience with this product, we would say that if it is managed well it is a valuable wealth accumulation strategy.”
Last week, the Treasurer announced that the government had decided not to make any changes to the borrowing arrangements for SMSFs, after reviewing a report on the issue by the Council of Financial Regulators and the Australian Taxation Office.
Treasurer Josh Frydenberg says the report found only a small proportion of SMSF assets were funded using borrowed funds and did not pose a material systemic risk.
SMSF lending has long been controversial and in 2014 the Financial System Inquiry recommended that it be banned.
According to ATO data, limited recourse borrowing arrangements in the SMSF sector were worth $42.8 billion in the December quarter, with little growth recorded over the previous 12 months.
A little over 5 per cent of SMSF assets are funded with borrowings.