Annual growth over $6bn, says aggregator
An increasing number of Australians are taking charge of their superannuation, meaning SMSF lending is growing, Connective says.
To take advantage of self-managed super fund market opportunities, the aggregator has launched a white-label product – Connective Elevate SMSF. Funded by Bluestone Home Loans, it can be used as a residential loan, or to refinance an existing SMSF loan.
As property sales volumes dip amid rising interest rates, Connective says it has seen a marked shift in the number of residential loan applications, with numbers down 20% year-on-year across all lenders over August to October.
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Connective head of home loans Michael Goerner (pictured above) told MPA that SMSF lending was one area of lending where activity had grown over the last 18 months.
“There’s currently $65 billion of SMSF loans in the market, and this is growing at over $6 billion annually,” Goerner said.
Goerner said SMSF loans were originally considered complex by most brokers, but with time, had become simpler. Over 1 million Australians now manage their own superannuation, representing an “enormous opportunity” for brokers.
Several existing borrowers are on current rates of 6% to 8%, and until now, have had limited options to reduce interest pressure, he said.
Goerner said that when SMSF lending first started, refinancing wasn’t available, and borrowers were at the mercy of what lenders wanted to charge in rates and fees. Now, the rules are very different, he said.
“Refinancing has now got a lot easier, without the need to change structure or trusts and it is now the new discussion with accountants and financial planners that have customers in this type of lending,” Goerner said.
Read more: Refinance: Everything you need to know
Goerner said borrowers on variable rate loans, as well as those rolling off record-low fixed rate loans, were creating a huge pipeline of work for brokers.
In the current rising interest rate environment, many borrowers are looking for competitive rates and product offerings. Brokers are also having to work hard to find suitable loans for borrowers rolling off lower fixed rate loans taken out over 2020 and 2021 (more widely referred to as the “fixed rate cliff”), who are now facing stiff 3% to 4% interest rate increases, he said.
“While there are a raft of special offers and cashbacks incentivising refinancing, brokers are having hard conversations with some borrowers who, due to the higher cost of borrowing and softening property values, have limited refinance options,” Goerner said.
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As the SMSF market grows, Goerner said Connective wanted brokers to “be at the forefront,” giving them solutions to help SMSF trustees who want to invest in property for their retirement.
“This is especially important when you consider that all of the major banks have pulled out of the SMSF lending market, leaving a big lending gap,” Goerner said.
Over the years, increased capital requirements for SMSF lending and growing political sensitivities have meant SMSF loans were often viewed as “set and forget” products, he said.
Goerner said there is now an opportunity for brokers to “have conversations with trustees” about refinancing. He said the Connective Elevate SMSF loan would appeal to brokers due to its strong focus on compliance and easy-to-understand policy.
Borrowers are required to have a complying self-managed super fund with a corporate trustee, and net assets over $200,000, he said. Borrowing of up to $1.5 million is available, with an LVR ratio of 80% (depending on property location), Connective said.
In the 2022 financial year, Connective said its home loans portfolio consistently ranked in the top 10 lenders for turnaround times.
The portfolio reached $5.8 billion in total settlements, up 84% year-on-year, the aggregator said.
