Commercial SMSF Funding is Still Available with ThinkTank

Over recent months, the spotlight once again turns to SMSF loans with the withdrawal of a number of lenders providing financial accommodation under Limited Recourse Borrowing Arrangements (LRBA's).

Often mentioned in analysis of SMSF portfolios is the growth in LRBAs, which have gone from a modest $2.5 billion in June 2012 to $31.4 billion in December 2017. This rate of growth received a good deal of attention in the Murray Financial System Inquiry (FSI) but largely ignores the small percentage that it represents of Total Assets. These LRBAs are secured mostly by Direct Property, both Residential and Commercial and of these assets it represents just 19.2%. It is expected that this number will continue to grow, in large part because of the considerable benefits associated with long-term owner-occupied investment in 'business real property' within an SMSF. The potential advantages of such an investment for retirement planning are significant in the current low growth environment.

From our own experiences, we note that most growth is in Commercial Property asset class with owner-occupiers looking at long-term investment strategies combined with security of tenure. While lenders report an extremely low rate of arrears on this type of loan, the protection provided to business owners if things do go wrong is considerable with the equity acquired in owner-occupied premises protected from creditors and/or administrators, which is exactly as intended for superannuation savings.

For those that have compliant LRBAs secured by business freehold assets and believe that their present lender may not be motivated to continue their current facilities, the option remains open to refinance existing facilities including the cost of the exercise. Additionally, the cash flow shock from rolling over from an interest only to a short term P&I facility, or reduced concessional contributions can be substantially alleviated by refinancing into an extended loan term.

Thinktank will provide a standard 25yr loan term, with 30 years term on request, thus reducing monthly repayments from a standard 15 or 20 year term and allowing the fund to build a higher level of liquidity for further investments.

For information on regards to the state of the SMSF market please click on the attached link.

Quarterly Market Update
Please click here to read up-to-date views on the state of the Australian commercial property market seen in light of recent global economic and financial market developments by Thinktank's Per Amundsen.

Please do not hesitate to contact me or your respective Relationship Manager should you have any questions on any of our commercial loan products or to workshop a potential commercial matter.

BOQ Spring Campaign Home Loan Offers

Our Spring Campaign customer offers launch on Monday 10 September. Designed to target first home buyers who are looking to buy their first home, as well as people buying their next home or refinancing their current home, a range of offers will be available to aid you in winning new business:

  • Intro Rate Variable Home Loan Launch
  • Special Offers

Intro Rate Variable Home Loan Launch

Effective Monday 10 September 2018, we will be launching our new Intro Rate Variable Home Loan, which is a fully featured home loan that offers a great discounted variable rate for the first two years and then rolls to a discounted Clear Path Variable Rate for the remaining term.

The campaign rates for the two-year intro period and the roll-to period are in the table below:

Loan Type

Clear Path Rate

Intro discount

Roll-to discount

Intro Rate

Roll-to Rate

Comparison Rate

Owner Occupied / P&I

4.56%

0.97%

0.40%

3.59%

4.16%

4.19%

Owner Occupied / IO

5.02%

1.03%

0.40%

3.99%

4.16%

4.27%

Investor / P&I

5.19%

1.45%

0.85%

3.74%

4.34%

4.37%

Investor / IO

5.59%

1.45%

0.85%

4.14%

4.34%

4.44%

Please note the following restrictions apply:

  • Only available for applications received on or after Monday 10 September 2018, and available until Sunday 16 December 2018;
  • Not available for refinance or restructure of existing BOQ lending;
  • New to Bank lending only, with minimum $150k loan amount;
  • LVR 90% or lower with LMI held (LVR 90% inclusive of capitalised LMI);
    • Lending with LVR 80% to 90% with no LMI is not eligible;
    • Lending with LVR over 90% is not eligible;

Construction loans: the intro discount is applied to the Interest Only reference rate during the construction period.

Special Offers - Owner Occupied and Investor

In conjunction with the launch of the Intro Rate Variable Home Loan products and the current Fixed Rate campaign offers, the special offers are being changed as below, resulting in some final rates increasing, some decreasing, and a change to the bands.

Product

Application Amount

Clear Path

HLPP

Carded Rate

Discount

Final Rate

Carded Rate

Discount

Final Rate

Owner Occupied P&I

<$250k

4.56%

0.00%

4.56%

5.20%

0.64%

4.56%

$250k - $500k

4.56%

0.57%

3.99%

4.85%

0.86%

3.99%

$500k - $1m

4.56%

0.72%

3.84%

4.85%

1.01%

3.84%

>$1m

4.56%

0.87%

3.69%

4.80%

1.11%

3.69%

Owner Occupied IO

<$250k

5.02%

0.00%

5.02%

5.66%

0.64%

5.02%

$250k - $500k

5.02%

0.63%

4.39%

5.31%

0.92%

4.39%

$500k - $1m

5.02%

0.78%

4.24%

5.31%

1.07%

4.24%

>$1m

5.02%

0.93%

4.09%

5.26%

1.17%

4.09%

Investor P&I

<$250k

5.19%

0.00%

5.19%

5.83%

0.64%

5.19%

$250k - $500k

5.19%

1.05%

4.14%

5.48%

1.34%

4.14%

$500k - $1m

5.19%

1.20%

3.99%

5.48%

1.49%

3.99%

>$1m

5.19%

1.35%

3.84%

5.43%

1.59%

3.84%

Investor IO

<$250k

5.59%

0.00%

5.59%

6.23%

0.64%

5.59%

$250k - $500k

5.59%

1.05%

4.54%

5.88%

1.34%

4.54%

$500k - $1m

5.59%

1.20%

4.39%

5.88%

1.49%

4.39%

>$1m

5.59%

1.35%

4.24%

5.83%

1.59%

4.24%

Special Rate Offers may only be exercised if the following are satisfied:

  • Only available for applications received on or after Monday 10 September 2018, and available until further notice;
  • Not available for refinance or restructure of existing BOQ lending;
  • New to Bank lending only
  • LVR 80% or lower, or LVR 90% or lower with LMI held (LVR 90% inclusive of capitalised LMI);

Lending with LVR 80% to 90% with no LMI is not eligible;

Lending with LVR over 90% is not eligible;

  • Split lending available;
  • Clear Path and HLPP loans only;
  • IO lending: discount applies to the Interest Only term of the loan and will not carry over to the P&I term;
  • Construction loans: the discount (see discount column) is applied to the construction and post-construction phase of the loan. If reference rates move before conclusion of the construction phase, the final rate listed above may differ.

Special Offer Eligibility

  • Eligible applications received before Monday, 10 September 2018 will qualify for the discounts available under the previous special offers;
  • Applications received on or after Monday, 10 September 2018 will be eligible for the new special offers above.

Updated Rate Flyers are attached, should you have any questions please contact your Business Development Manager.

The launch of our new Intro Rate Variable Home Loan

Effective Monday 10 September 2018, we will be launching our new Intro Rate Variable Home Loan, which is a fully featured home loan that offers a great discounted variable rate for the first two years and then rolls to a discounted Clear Path Variable Rate for the remaining term.

Product Features

  • No application fee
  • $10 monthly fee
  • One free valuation per application
  • Mortgage Offset
  • Redraw available
  • P&I or Interest Only repayments (2yr IO term only)
  • Owner Occupier and Investor
  • Available for construction (interest only reference rate applies during construction)

Restrictions

  • $150,000 minimum loan amount
  • 90% maximum LVR (inclusive of LMI)
  • New to bank lending only
  • Not available for the internal refinance of existing BOQ loans

* The new Intro Rate products will not be available in ApplyOnline until later this month. As an interim measure Brokers will be required to select another product e.g. Clear Path and detail the product required in their notes.

Changes to the Standard Fixed Rate roll to Rate

Effective Monday 10 September 2018, the roll to rate for all Standard Fixed Rate products will change to the Clear Path variable rate rather than the standard variable rate.

For more information download the following PDFs:

BOQ'S Latest Broker Offers
BOQ's Investment Rates
BOQ's Owner Occupied Rates

Vow Home Loans Product Range

Effective for all settlements on or after 1 September 2018. The new standard upfront commission for the Empower Range of loans is 0.65% plus GST.

Property Investors Need to Protect their Cashflow from Out of Cycle Interest Rates

By Paul Bennion, Managing Director, DEPPRO

The recent decision by Westpac to increase its variable home loan interest rate by 14 basis points in an effort to recoup an increase in borrowing costs underlines the need for property investors to protect their cashflow.

Westpac as well as the other large banks are under pressure to increase interest rates due to the fact that they borrow large amounts of money from overseas and in particular the USA where interest rates are rising.

The Federal Reserve in the USA has been increasing interest rates over the past year because of the threat of inflation posed by a surging economy and near full employment.

As a result, the official interest rate in the USA is now at 2% which is higher than Australia at 1.5%. For many years, official interest rates in the USA were lower than Australia.

Interest rates in the USA are expected to rise even further than this will have a direct impact on the borrowing costs of the big banks in Australia meaning that they will pass these costs onto local borrowers.

For property investors with a large number of investment properties, these out of cycle interest rate increases can eat into their cashflow and make it harder to service their loans.

Some investors may seek to take advantage of low fixed interest rates to protect themselves against rising interest rates while others may choose to refinance to lower interest rate products.

However, the ability for investors to refinance is now much more difficult due to stricter lending requirements being imposed by APRA on financial institutions.

The credit squeeze being imposed by APRA and the big banks means that it is much harder for people to refinance into more competitive home loans. They are effective prisoners in their own home loans.

For example, recent figures produced by Digital Finance Analytics (DFA) estimates that nationally some 31,000 households refinance applications were rejected in July which is an increase of 23,000 since August last year - a surge of 1248 per cent.

In such an environment, it is critical that property investors boost their income by ensuring that they claim all their legitimate tax benefits relating to property investment such as depreciation allowances.

It is estimated that only one in five residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties. For an average investor, these generous tax depreciation benefits can add up to thousands of dollars in additional cash flow each year.

Property investors who have a portfolio of investment properties should also realise that they can claim tax depreciation benefits retrospectively if they have not done so in the past.

DEPPRO has been able to assist property investors who have several investment properties achieve tax benefits of over $100,000 by claiming depreciation allowances for previous financial years.

The cost of a depreciation report as prepared by DEPPRO is around $600 and this is tax deductible and covers the lifetime ownership of the investment property.

Click the link below and complete the details to ensure your client receives a higher return on their cashflow.

www.deppro.com.au