AMP to remove SMSF loan product from sale

AMP Bank has announced that it will remove its SuperEdge Loan from sale on 20 October 2018, meaning that no new applications for SMSF loans will be accepted by the lender after this date.

The lender has added that SuperEdge Loan applications that are lodged before 20 October will be “assessed and reviewed under current policies”.

In August of this year, AMP Bank said that it would no longer offer interest-only terms on new SuperEdge Loans, and it has now stated that any existing AMP SuperEdge Loans will be prevented from switching to interest-only repayments, refinancing or extending their loan term after 10 November 2018.

However, the lender has said that existing SuperEdge Loans will “continue to be supported” should the borrower wish to switch to principal and interest (P&I) repayments ahead of their scheduled switch date, or switch to a fixed rate (interest-only fixed rates will only be made available to existing interest-only loans).

AMP Bank has added that there is no change to AMP Bank’s SuperEdge range of deposit products, which it said were “highly competitive products [that] will continue to be available for new and existing SMSF customers”.

Several figures in the industry have suggested that they were not surprised by the bank’s move, with RateCity research director Sally Tindall stating that the AMP announcement “comes as a shock to no one,” adding that its chairman, David Murray, “has been one of the most vocal critics of self-managed super fund property lending”.

The news marks the latest shift away from SMSF lending, after the Commonwealth Bank of Australia announced that it would cease accepting new applications for its SuperGear loan, a limited recourse loan that allows SMSF trusts to purchase a property (or refinance an existing eligible loan for an investment property) from the close of business on 12 October.

Therefore, starting from October, none of the five largest lenders will offer new business SMSF loans for residential property purposes.

While ANZ never really played in the space, NAB stopped offering SMSF loans for residential purposes in 2015 and Westpac announced in July of this year that both itself and its subsidiaries would also be “streamlining” their product offerings and no longer offer self-managed super fund loans for new consumer or business lending.

Ms Tindall commented: “Banks are focused on reducing risk in their loan books. In a falling property market, it’s not surprising we’re seeing lenders retreat from this type of lending.”

While the major banks have been tightening their appetites for SMSF loans (as well as several different loan products and repayment types in the past year, such as interest-only lending and investor lending), several lenders do still offer SMSF loans for both residential and commercial purposes.

Better Mortgage Management, Bank Australia, Bank of Queensland, Heritage Bank, La Trobe Financial, Liberty Financial, Macquarie Bank and Yellow Brick Road are among the handful of lenders that continue to offer loans in this space.

However, SMSF loans and advice have been under scrutiny over the past few months, after a case study aired during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry suggested that Westpac had given “inappropriate advice”.

SMSF loan concerns are not a new issue, as several concerns came to light through the findings of the Financial System Inquiry (FSI) in late 2014, which urged the government to prohibit certain SMSF borrowing arrangements.

The FSI panel recommended a removal of the exception to the general prohibition on direct borrowing for limited recourse borrowing arrangements (LRBAs) by superannuation fund.

The coalition government did not move to implement the recommendation. However, the Labor opposition has expressed support for such a measure and has promised to ban direct borrowing by SMSFs as part of its new housing affordability package.

[Related: Analysis: Is SMSF lending on the chopping block?]