Funds Cautious In Wake Of Natmut-actu Plan
Sydney Morning Herald
Friday April 22, 1994
Despite strong demand expected for the National Mutual-ACTU home loan plan announced this week, do not expect a rush of similar announcements in the near future.
Ms Susan Ryan, executive director of the Association of Super Funds in Australia, and former Federal minister, said she was not aware of any other funds intending to provide cheap home loans for members.
Ms Ryan also warned that individual funds would have to think long and hard before committing themselves to a scheme similar to that pioneered by National Mutual and the ACTU, with trustees needing to consider whether the return on the investment would be good enough to warrant the risk involved.
"What the trustees of the fund have to consider is the return on the investment inherent in these loans. I really think it will be a case of 'wait and see'," Ms Ryan said. "They would also need to consider the size of the home loan market. Is it close to saturation? You would only want to do it if the demand was there."
A subsidiary of National Mutual, Superannuation Members Home Loans, has been set up to run the scheme, which is expected to have access to an initial lending pool of $150 million.
Major super funds (yet to be named) have expressed interest in buying bonds from the scheme to gain access to the borrowable funds. This will allow the funds to receive a competitive return on their money while protecting individual super from mortgagees defaulting on their loans.
The interest rate to be charged on the loan will be linked to the 90-day bank bill rate, meaning that if the loans were set in the current conditions they would be between 7.5 and 7.75 per cent - 1.25 per cent less than the major banks' variable rates.
Ms Ryan felt there were no inherent problems in the National Mutual-ACTU scheme, calling it a "win-win situation".
"I can't see any problems with the scheme. There are benefits if people get into housing - and if the scheme provides a sound, stable investment."
"Housing finance is a suitable investment for the super funds. People generally do repay their mortgage. With the publicity it's had, I'm sure other funds will be looking at it, but they won't be jumping straight in."
She added that it would be inappropriate for some funds to move into home lending, especially those with a predominance of middle-aged or elderly members.
Workers who qualified for loans would be able to borrow up to $250,000 to buy owner-occupied, completed residential homes and for refinancing.
The major banks said that intending borrowers should look at the entire package rather than the headline interest rate, with a question over how customers would make their mortgage repayments. The $150 million currently allocated is also a tiny amount of total lending, equivalent to about two days' lending for the Commonwealth bank.
© 1994 Sydney Morning Herald