Leveraged SMSF sector in doubt as CBA scraps SMSF lending

Leveraged SMSF sector in doubt as CBA scraps SMSF lending
Leveraged SMSF sector in doubt as CBA scraps SMSF lending

CBA, the nation's largest mortgage lender, is axing residential and commercial loans for self managed super funds (SMSF).

The bank will be withdrawing its SMSF lending product, SuperGear, from October 12.

Westpac Group, the nation's second largest mortgage lender, already pulled out of the sector in July.

But the Australian Financial Review said the move had shocked mortgage brokers and financial advisers. 

"We are seeing the writing on the wall for leveraged SMSFs," said Sally Tindall, director of research for RateCity, which monitors rates for financial service products. 

"This calls into question the viability of the leveraged SMSF sector."

"CBA has decided to withdraw its SMSF lending product that allows SMSF trusts to purchase both residentially and commercially secured properties," a spokesman said.

"This is part of our strategy to become a simpler, better bank.

"We are streamlining our product portfolio and have decided to discontinue SuperGear."

The bank said it will be writing to customers who hold a SuperGear loan outlining the changes.

It will continue to support existing loan accounts.

Regulators fear problems arising from SMSF investors leveraging their superannuation to invest in a single residential property because of the lack of diversification and increasing dangers of loss in a falling property market where it is difficult to find tenants. 

A key finding of the David Murray-led financial system inquiry in 2014 was that leverage should be banned in superannuation funds to mitigate the risk of financial instability.

The government rejected his advice.

Nearly $700 billion is held in SMSF funds by more than one million investors.

During the past four years the number of members investing in property has increased from about 3.6% to 6.9% of SMSF fund assets.

Smsfs Cba


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