Super funds booming on the back of lowest interest rates seen in years

Yannick Ieko, Founder and Managing Director of SMSF Loan Experts

According to Yannick Ieko, self-managed super funds (SMSF) are booming on the back of the lowest interest rates the country has seen in years.

“Self-managed super funds have paid higher interest rates for loans when purchasing property and assets. The high cost to switch to other loan providers offering better rates has also hindered SMSFs from making the switch. Now this has all changed,” Ieko said.

SMSF Loan Experts analysis of self-managed super funds

Yannick Ieko is the founder and MD of SMSF Loan Experts, and has been providing the market with loans and guidance for lending for self-managed super funds for over 12 years. 

“We are seeing the biggest movement in SMSFs we have ever seen. Not only are more people setting up their own SMSFs, they are actively taking out loans to purchase property and other assets and switching to other loan providers to secure better interest rates,” Ieko said.

“2021 is the year of the SMSF Ditch and Switch!  SMSFs are ditching their lenders and moving over to other lenders that are providing better rates.”

“Currently, the interest rate starts at 3.59% for residential up to 60% LVR (loan to value ratio). The rate recorded on 11 September 2020 was 4.89% with the same lender, which has been the market leader for over 18 months, so the current rate is a good benchmark.”

Ieko also points out that the burgeoning SMSF market is also driving an increase in the number of lenders in the SMSF space.

“The growth of the market has attracted new lenders.  There have recently been two new entrants, which is significant in a limited field.” 

“There are now a number of mortgage managers offering what is essentially one product with different branding, plus another six separate lenders that we are aware of. There are also a number of private lenders and family offices servicing this space quietly”

Millennials’ impact on self-managed super funds

Ieko also states that with more and more millennials hitting 40, they want more control over where and how their super is managed.

“I believe we should be thanking millennials for these positive developments.  More and more people under the age of 40 are setting up their own self-managed super funds and they are questioning the market and they want more options and better competition,” Ieko added.

“Not only are lenders now offering better rates, the cost to ditch and switch is lower.  The costs are certainly becoming less prohibitive.

“From approximately $3,000 two years ago to $770 today, the costs to refinance are so much cheaper and the interest rates are more competitive than ever before.” 

“Where once it was too costly to move to a cheap loan, now it is a no brainer. As more SMSFs buy property, competition is only going to increase. It is no longer a matter of set and forget – SMSFs should be looking around for better rates and moving when they find them.”

“The savings are significant and this means more money in the bank account of the SMSF. Consequently, more SMSF investors are choosing to refinance. The rate discrepancy between established loans and new deals is much greater and the associated costs much lower.”

“We are entering a new era for self-managed super funds as millennials push the SMSFs sector into new territory – a territory where SMSFs have more power and influence in the market.” 

“This is only going to place more pressure on the larger super institutions to attract and retain customers. Millennials are informed and they are active and they want value and control over their retirement funds and they are willing and able to do this themselves.”

SMSF Loan Experts offer greater flexibility in approving more property types than many competitors, and seek to ensure the most ultra-competitive loan rates in the market.

SMSF Loan Experts specialist services include:

  • End-to-end SMSF set-up
  • Lending solutions for bad credit
  • Bespoke strategies to improve the performance of investment property
  • Expert guidance and finance solutions for both residential and commercial property investment
  • Refinancing assistance which empowers clients to take advantage of the best rates available