Westpac Puts The Brakes On SMSF Loans

Westpac, along with its subsidiaries St George, Bank of Melbourne and Bank SA, will stop offering SMSF loans from Tuesday 31 July 2018. What options are left to borrowers wanting to buy residential or commercial property for their self managed superannuation fund (SMSF)?

Can I still get an SMSF loan with other lenders?

Yes, we have a number of major and second-tier lenders on our panel who can assist you with applying for a new SMSF loan. We’re not sure how long they will keep operating in the SMSF loan space!

Call us on 1300 889 743 or complete our free assessment form to speak with one of our SMSF loan specialists.

What if you have an SMSF loan application in progress?

Westpac and St George SMSF applications received before Tuesday 31 July 2018 will still be considered! For an application to be considered, you’ll need to have:

• Completed, signed and returned your application form.
• Provided the minimum SMSF loan documents required by the lender.

If you’ve been in touch with one of our mortgage brokers about applying for an SMSF home loan, please contact them as soon as possible to ensure your application is submitted on time.

What if you currently have an SMSF mortgage with Westpac?

Some restrictions will be introduced for current Westpac SMSF customers looking to refinance or make changes to their mortgage. You’ll still be able to:

• Split your mortgage.
• Switch loan products within St George and Westpac.
• Extend the loan maturity.

From Tuesday 31 July, you’ll no longer be able to:

• Switch from principal and interest (P&I) to interest only (IO) payments.
• Extend your interest only term.

Why did Westpac pull out of SMSF lending?

A lot of it has to do with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. To be fair though, the industry regulator, the Australian Prudential Regulation Authority (APRA), has long been concerned with the super industry as a whole. You can actually go all the way back to the 2014 Financial System Inquiry (FSI) by David Murray. To cut a long story short, the concern is not so much with SMSF loans but SMSF borrowers receiving poor advice from financial advisers. The royal commission hasn’t called for a flat out ban on SMSF lending but the lending and capital requirements that are likely to come out of the review will make doing business really difficult for banks. Westpac and St George are just trying to steer clear of the legal complexities that have become so heightened with lending to self managed super funds. It’s the reason why Commonwealth Bank recently decided to demerge its wealth and SMSF management businesses, including Colonial First State and Count Financial. This was preceded by ANZ and NAB. In a falling property market, the regulators calls for greater monitoring in the superannuation sector make sense so long as Australians continue to rely heavily on residential property when building their SMSF.

Will Commonwealth Bank and Macquarie pull out as well?

It’s not clear yet. The fact that Westpac stopped SMSF loans completely is still a shock! It may just be a matter of time with CBA but, as for Maquarie Bank, watch this space.