Adviser interest in LRBAs rebounds

Interest in limited recourse borrowing arrangements (LRBA) from financial advisers has spiked following the re-election of the coalition, according to a specialist loan broker, who has predicted the major banks will return to the market.

Investure director Darren Coff said he had already started to see a pick-up in interest in LRBAs, which began almost immediately after the election.

“There were conversations I was having with advisers that were on hold in the lead-up to the election and on the Monday afterward I was receiving calls from them asking how we could proceed to put something together for their clients,” Coff said.

“The strong interest we are seeing from the SMSF sector is because advisers and their clients have got some certainty back into the market and I have been getting the same message from our referral network that there are at least three years of certainty ahead.”

Coff, who is based on the Gold Coast and is licensed by national mortgage aggregator Outsource Financial, said around half of his business was dealing with SMSFs and he considered there were at least 10 non-bank lenders still offering loans to SMSFs for LRBAs.

He said new entrants were also preparing to move into the space and he also expected the major banks would re-enter the LRBA lending market within the next 12 months.

“I do expect the larger players to re-enter the market as they left because of the banking royal commission and moved away from anything that may have attracted extra heat for them,” he said.

“Labor also claimed LRBAs were forcing up house prices and with the raft of changes suggested there were some sound concerns about what would happen to this market if they won the election.

“Since the election, the attitude from lenders, brokers and advisers has been more positive and by this time next year I expect some of the bigger names to have returned.

“Most of the risk in LRBA lending is mitigated by government policy and the 9.5 per cent super guarantee, which could go to a LRBA repayment, making these one of the safest loans available from a broker point of view.”

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