AMP Bank has announced that it will no longer offer interest-only terms on its SuperEdge SMSF home loan product, effective from Tuesday, 7 August.
The bank has noted that existing loans with a settlement date prior to 6 August 2018 are not impacted by this change.
Additionally, securities zoned “rural residential” will no longer be available for SuperEdge loans.
Further, effective for all new applications received from Friday (3 August), the SuperEdge variable principal and interest rate will rise by 25 basis points to 6.44 per cent.
The bank has also lifted fixed rates on the same product by 80 basis points, with fixed rates now starting from 6.09 per cent.
In a statement to Mortgage Business, an AMP spokesperson said: “These adjustments are in response to recent market changes as well as the bank’s focus on managing its portfolio responsibly while balancing this with the needs of our customers, shareholders and regulators.”
SMSF lending in the spotlight
AMP Bank is the latest lender to announce changes to its SMSF home loan offering, after Westpac Group (including Bank of Melbourne, St. George Bank and BankSA) announced that it would no longer offer SMSF home loan products.
The changes come amid ongoing scrutiny of superannuation and SMSF lending, with several instances of misconduct being brought to light in the financial services royal commission.
Further, ASIC released a scathing report earlier this year which found that 90 per cent of SMSF advice does not comply with best interest obligations.
ASIC reviewed 250 client files randomly selected based on ATO data and assessed compliance with the Corporations Act’s best interests duty and related obligations to understand member experiences in setting up and running an SMSF and whether advice providers are complying with the law when providing personal advice to retail clients.
The findings of the review, released in Report 575: SMSFs: Improving the quality of advice and member experiences, indicated that in 10 per cent of the files reviewed, the client was likely to be significantly worse off in retirement due to the advice.
It also found that in 19 per cent of cases, clients were at an increased risk of financial detriment due to a lack of diversification.
The report also stated that in 91 per cent of files reviewed, the adviser did not comply with Corporations Act’s best interests duty and related obligations, which was previously revealed during the royal commission hearings.
In recent years, SMSF lending has come under scrutiny, with concerns coming 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.