SMSF home loan borrowing surges in March 2021 quarter

author-avatar By
on May 27, 2021
SMSF home loan borrowing surges in March 2021 quarter

More self-managed super fund members are taking on debt within their portfolios, with new data revealing a $3.5 billion rise in limited recourse borrowing arrangements in the first three months of 2021.

The ATO's latest Self-managed super fund (SMSF) quarterly statistical report for March 2021 shows more than 6,000 new SMSFs were established in the three months to 31 March, with the total number now sitting at just under 600,000. 

Total estimated SMSF assets increased by 3% over the quarter to $787 billion, and while the most common asset types are still listed shares (26%) and cash or deposits (19%), the biggest increase was seen in property. 

Lender

Variable
More details
SELF MANAGED SUPER FUND LOAN
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
SELF MANAGED SUPER FUND LOAN

SMSF 80

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Ocean SMSF (No Offset) (Metro) (Principal and Interest) (LVR < 60%)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF 70 (Refinance)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Liberty SuperCredit SMSF (LVR < 60%)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF Residential

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Variable
More details
  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

SMSF 70 (Purchase) (New Customer)

  • Easy refinance process
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.


The total value of real residential property held by SMSFs grew by 6.36% ($2.64 billion) to more than $44.1 billion over the quarter, while limited recourse borrowing arrangements (LRBA) - which are often utilised by SMSFs for investing in property - also rose by 6.36% ($3.55 billion) to $59.4 billion.

Such loans limit the recourse of the lender, in that the lender can only repossess the asset (e.g. the investment property) purchased through the loan to recoup the debt should the borrower default. This is unlike the typical home loan, where the lender usually has full recourse to go after other assets too, such as cash in the bank or a stock portfolio.      

Related: What can you invest in with an SMSF? 

The ATO's data shows LRBA use stayed relatively stagnant over 2020 when the pandemic hit, after increasing in value by more than 10 times from $400 million about a decade ago. 

This recent increase is also in line with the Australian Bureau of Statistics' (ABS) most recent household lending data, which not only saw new loan approvals hit a new record high in March, but also recorded a substantial increase in investor lending after a 20-year low seen last year.

Prudential regulator data also shows total superannuation assets increased 3.1% for the quarter and 13.9% over 12 months to a record high of $3.1 trillion.


 Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWS
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWS

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 7, 2022. View disclaimer.

The big four banks and many other institutions no longer offer LRBA loans due to their perceived risk and complexity, with the likes of Westpac and Commonwealth Bank ending their involvement in 2019. 

The 2014 financial system inquiry recommended banning LRBAs to “prevent the unnecessary build-up of risk”, with lower-income users generally the most disadvantaged by using these schemes. 

See also: When are SMSFs not worth the cost?

But it appears that hasn't deterred SMSF customers from using these loans.

Lenders still offering SMSF loans at the time of writing include: 

  • La Trobe Financial
  • Liberty Financial
  • Bank of Queensland (BOQ)
  • Switzer Home Loans
  • Mortgage House
  • Freedom Lenders
  • Reduce Home Loans
  • Rate Chaser Home Loans
  • LJ Hooker Home Loans
  • Regional Australia Bank

Photo by MayoFi on Unsplash

Disclaimers

Savings.com.au does not provide tax advice. This material has been prepared by Savings.com.au and is for informational purposes only, and is not intended to provide, and should not be relied on for tax advice.

For tax advice relevant to you, visit the ATO or consult an independent tax advisor.

Latest Articles

author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy