27 July 2012 7:11am
National Australia Bank is hoping to generate growth in its margin loan book with the launch a new loan designed for self-managed superannuation funds.
NAB Super Lever, which was launched earlier this month, is a margin loan that has been modified to allow trustees to meet SMSF borrowing requirements.
The margin lending market has been hit by a double whammy of poor equity market conditions and the general reluctance to take on debt.
Margin loan balances hit an eight-year low in the March 2012 quarter. The Reserve Bank reported a fall from A$15.1 billion in the December quarter to $14.9 billion in March. The market has been in decline since late 2007, when balances reached a peak of $41.6 billion.
The number of client accounts has fallen from 248,000 to 207,000 over the same period.
NAB's head of margin lending, Adrian Hanley, said there was demand from SMSF trustees and their advisers for gearing products.
The Government’s decision to limit concessional superannuation contributions to $25,000 a year has made gearing a more appealing option for SMSFs, because super fund assets acquired with borrowed funds do not count towards the contribution cap.
And in April the Australian Taxation Office issued a ruling, SMSFR 2012/1, that cleared up some confusion around the SMSF gearing rules.
Most of the SMSF lending activity to date has been in the provision of mortgages for funds buying residential or commercial property.
Some lenders have put SMSF margin lending in the too hard basket because of rules that require a loan to be for the purpose of funding a "single acquirable asset". In theory, this means that for every stock in an equity portfolio the SMSF trustee would need a separate loan.
NAB has dealt with this problem by creating a loan that allows for a number of sub-accounts within a single facility.
NAB also provides the security trustee – the SMSF borrowing rules require that an asset acquired with borrowed funds be held in a separate trust until the loan repayments have been completed.
Maximum loan-to-valuation ratios have been set lower than for a standard margin loan. The maximum LVR for a stock or fund in NAB Super Lever is 55 per cent, compared with 75 per cent for a standard margin loan.