James Barger-Bos, CEO of Finance Wise Global Securities Pty Ltd, has over 27 years of financial services experience. Fwgs is offering accountants a simple clear and cost-effective solution to the accounting exemption. By becoming authorised representatives accountants will have an intuitive web based software solution, a complete range of training options (including an RG146 face to face course) and for the first fifty accountants a share of the net profit.
What does APRA have to do with the changing landscape of SMSF lending? Everything.
The lending limits imposed by APRA have caused banks to increase their margins on investments loans, or interest only loans, and in some cases on both. This means a home owner, at some banks, who has elected to pay a portion of their debt interest only is paying a higher rate. Why?
Simply, those loans are not being repaid and thus it reduces the bank’s capacity to lend to new clients.
This policy decision has caused some lenders to exit the LRBA space. This is in spite a continuing desire by lenders to capture this market which earns better margins than traditional home loans and enjoys extremely low default rates. However, they are being forced not to lend.
In addition, some lenders have scrapped plans to enter the space and this may exacerbate another issue. The lenders who remain are going to arrive at their APRA lending targets quicker than anticipated and will then have to hang up the closed for business sign. This damages their brand as the mortgage broking community takes a dim view of lenders who exit, and the rest of their product offerings may be hurt as a consequence.
Brokers will forget why this occurred. They will just remember that it did and the one application they tried to present could not proceed.
But it gets worse. If the transaction does proceed and is pre-approved but the client is purchasing off-plan or simply needs time to conduct their research and identify the most suitable property and THEN the bank pulls the plug, the client may find themselves being left completely in the lurch.
Rightly, they and their advisors believe funding is in place but with a single computer key stroke that ceases to be the case.
If you would like to discuss how the constantly changing banking environment would affect your capacity to provide advice once the exemption expires then please feel free to ask us by emailing [email protected]
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