A specialist lender in the SMSF space has warned some individuals might face a number of significant risks if they look to put a limited recourse borrowing arrangement (LRBA) in place on a property with a long completion time horizon before 10 August to avoid the gearing ban on residential real estate.
“There is an issue with people taking long-term purchases [using an LRBA] because you don’t know what [the lending landscape or your personal circumstances are] going to be like in two or three years’ time. If those properties are due to settle, [then you have] an added spectre of risk,” Bluestone Home Loans head of specialised distribution Richard Chesworth noted during a media briefing held yesterday.
“So you’ve got your property risk, you’ve got your personal circumstances risk [such as considering if you] still have your job, [if you have] your health, are we all [still going to be] in the same fund together, have we had a relationship breakdown. All of those factors.
“It’s something to be mindful of.”
According to Bluestone Home Loans chief commercial officer Tony MacRae, his organisation has definitely experienced the impact of the LRBA ban in terms of business activity.
“We’re seeing a little of the last-minute 45-day dash for SMSFs that’s going on,” MacRae said.
Further, he suggested the current lobbying to have the LRBA ban on the purchase of residential properties exclude new builds is unlikely to achieve a successful outcome.
“I think it’s a longshot,” he indicated.
With regard to the effect the LRBA restriction will have on the lending landscape, he expected a degree of consolidation among lenders, but not immediately.
“While the lobby goes [on], I don’t think we will see players come out saying ‘we’re withdrawing’, but post that [period] I think there is a relatively high probability of consolidation,” he said.
However, he took the opportunity to confirm Bluestone’s market participation in the future.
“We will remain in [the SMSF] space for refinances,” he said.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin