Westpac announced on Monday that it is discontinuing lending products for self-managed superannuation funds (SMSF).
“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," a bank spokesman said.
This move comes at a time when new lending for housing has weakened in previous months, which analysts sensed was due to stricter lending standards from banks, and less demand for loans from customers, according to the Sydney Morning Herald
While a relatively minor part of the mortgage market, property investment funded by SMSFs has received criticisms from experts and authorities in the last five years for supposedly “adding to risks in the financial system.”
In 2013, the Reserve Bank of Australia advised that property investment through SMSFs had triggered a new "vehicle" for house price speculation. The central bank highlighted that the method could highlight movements in home prices.
Further, the 2014 financial system inquiry led by former Commonwealth Bank Chief David Murray proposed to the government that SMSF property lending should be banned for the same reasons. However, the government rejected the recommendation.
SMSF lending only holds a small share in Westpac's loan book, and it was estimated by the central bank that these funds had around $80 billion invested in direct property holdings five years ago.
SMSF property investment loans are not being offered by ANZ Bank, and National Australia Bank halted the practice in 2015. With Westpac’s decision to scrap the practice as well, this leaves Commonwealth Bank as the only bank among the “Big Four” to offer new loans in this part of the market.
Related stories:
Macquarie Australia Raises Its Home Loan Rates
RBA Keenly Monitoring Australia's Home Prices
