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The SMSF Mortgage Shock – It’s time to refinance

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While the fixed rate mortgage cliff continues to capture headlines, there’s another interest rate shock that’s fast approaching, impacting your SMSF customers and your accounting partnerships.

SMSF loans can often be coined a ‘sleeper loan’ based on the fact that once the loan is settled, there’s not much more you can do, such as accessing further equity in the property for other purposes, so they become relatively set and forget. For many SMSF trustees, that hasn’t been an issue until now and the loan will soon present as a rude awakening.

The SMSF lending market continues to shift from Banks to non-bank lenders. Through this shift, SMSF trustees have experienced a rise in their interest rates, which hasn’t impacted their monthly cash flow as it’s all operating within their SMSF. Bluestone are now seeing a number of these residential SMSF loans being charged interest in excess of 10%, which are being refinanced to as low as 6.89%. Hence,a lift in refinance demand  is anticipated when trustees complete their annual returns and realise that their SMSF loan is once again negatively geared.

Richard Chesworth, Bluestone’s Head of Specialised Distribution reminds us of the old adage around spending a dollar to save fifty cents. “If an SMSF is negatively geared, you’re actually spending a dollar to save fifteen cents!”

What SMSF trustees will realise when they finalise their annual returns for 2023, is that the loan interest is not just absorbing the full rental return, but also eating into their hard earned contributions and retirement savings.

“At Bluestone, we’re regularly seeing annual interest savings of more than $8,000. To put this into perspective, that’s like a fund member having a super guarantee uplift if they had received a $72,500 pay rise (based on an 11% super guarantee contribution),” says Chesworth.

“For mortgage brokers, reducing your customers’ SMSF loan interest expense by 30% will have a compounding effect of boosting retirement savings by thousands of dollars each year.”

Chesworth points out that  accounting and financial planning referral partners will also benefit by increasing their return to their customers, as they’re reliant on mortgage brokers to provide the required credit advice.

Speak with your Bluestone BDM or call 13 BLUE to find out on how Bluestone can support you with SMSF lending. As well as comprehensive SMSF training and support, Bluestone has simplified the process being fully integrated with ApplyOnline including an e-signing application form and NextGen ID.


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