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Westpac has announced that “in order to streamline [its] product offering”, it will remove its SMSF Investment Property Loan from sale and no longer permit business lending to an SMSF for residential and commercial securities.
The move means that Westpac and its subsidiaries Bank of Melbourne, St. George Bank and BankSA will no longer offer the product.
Currently, the SMSF Investment Property Loan enables Australian residents with an established (or soon-to-be established) SMSF to use their super to borrow between $200,000 and $2 million in order to purchase residential investment property in Australia.
The property trustee pays the deposit and exchanges contracts and, once the loan is settled, the property trustee mortgages the property to Westpac and Westpac advances the loan.
However, SMSF lending represents only a small proportion of the major bank’s portfolio.
The bank has said that credit approval of in-flight deals, as at 31 July 2018, will be allowed up until 30 October 2018 if the signed customer application forms are held and dated prior to 31 July and if the customer sales conversation has been recorded in internal systems prior to that date.
Westpac has confirmed that it will continue to service its customers with existing SMSF loans “as allowable under the credit policy”, including splitting loans, switching loan products and extending loan maturity.
However, from 31 July, it will no longer permit SMSF loan customers to switch from principal, interest & fees* (PIF) to interest-only to IO, or any extensions of interest-only terms.
A Westpac spokesperson said: “We continually review our products and services to ensure they meet the requirements of our customers. In order to simplify and streamline our self-managed super fund products, we will be withdrawing from sale our SMSF home loan product and business lending to SMSFs, effective Tuesday, 31 July 2018.
“We will continue to service and support our existing customers.”
SMSF loans and advice have been under scrutiny recently, after a case study aired during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry suggested that the bank had given “inappropriate advice”.
Further, a recent review from the corporate regulator found that 90 per cent of SMSF advice does not comply with best interest obligations.
*This story was updated at 1.30pm on 16/07/2018 to reflect a correction to the definition of PIF.