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Lenders have begun responding to broker concerns relating to clients with trust loans not being able to access lower rates.
After brokers raised the alarm to The Adviser about the fact that some of their clients are being left in ‘trust prison’, some lenders have begun clarifying their position on the matter.
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Last week, The Adviser reported that several lenders are refusing to come to the table to reprice some existing customers onto lower variable rates, despite their rates being above market pricing.
Based on feedback from brokers, the problem appears to centre around investor borrowers with loans tied to properties held in trust, as well as loans associated with self-managed superannuation funds (SMSFs).
The allegations suggest that some banks are effectively price gouging their customers with trust loans (or SMSF loans) by declining to adjust the rates to more competitive levels.
The issue is particularly prevalent with loans that have been ‘grandfathered’.
Lenders that were called out as culprits included Westpac, St.George, NAB, and Macquarie.
Pink Finance founder and director Nicole Cannon said it had been “very hard to get these loans repriced”.
“We have noticed that there is no room or appetite for rate negotiation due to this loan no longer being available on the market. It seems very short-sighted to me and has a compounding effect,” Ms Cannon said.
“When a major bank is not willing to budge on their [rate], this creates an unsatisfactory customer experience for our clients. They are very unhappy with their primary institution who may also have their residential banking, credit cards and home loans.
“This creates an opportunity [for brokers] to do a full review on their entire portfolio and to manage all their loans, starting with refinancing of their SMSF/trust loan and then their other loans as well.”
What are the lenders doing?
At Macquarie, it does seem to be the case that clients on SMSF loans (which were mothballed by the bank in 2019) are not able to be repriced.
While the lender will usually reprice and service customers who request to reduce their interest rate, the process does not apply for legacy products.
However, customers who are unable to reprice legacy products are able to refinance away from the bank without incurring a penalty/break cost.
The bank’s SMSF book is currently believed to represent just 0.4 per cent of its customers.
However, a Westpac spokesperson has told The Adviser that there have been no credit policy mandates implemented that would prevent company or trust borrowers from being repriced.
This came despite several brokers sharing examples where they had been unable to negotiate down certain loans (for example, an SMSF loan with Westpac and an interest-only investor loan for a property in trust [with an offset] at St.George) and instances where their clients had been informed by retention teams that there was a ‘blanket rule’ in place that prevented them from being repriced.
In a statement to The Adviser, the Westpac Group spokesperson said: “We’ve made no changes to our policies in this regard, and we respond to all broker requests on a case-by-case basis.”
Have you or your clients been told that they’re unable to reprice a loan that involves a property in trust with a bank?
Let us know in the comments below!
[Related: Lenders refusing to reprice some borrowers, brokers warn]
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