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More lenders will follow Macquarie Bank’s lead and stop new lending to trusts and companies, according to brokers.
The comments come after Broker Daily revealed that from Friday (31 October), Macquarie Bank will not accept new home loan applications where the borrower is a trust or company.
Commenting on the change’s impact, Eva Loisance, principal at Sydney-based brokerage Finni, told Broker Daily that the shift will “reshape investor behaviour and broker strategies” and signals a “pushback against loophole-driven lending”.
“For clients using these structures often for asset protection, tax planning, it may reduce borrowing capacity, delay approvals, or force to move to personal-name lending,” she said.
“Multi-property investors and specifically those influenced by social media ‘spruikers’ promoting complex structures will be particularly affected.”
GSC Finance Solutions managing broker Matt Turner said he viewed Macquarie’s exit from the lending segment as a major industry change.
“Anytime there is a lender pull out of a segment it is significant, however Macquarie has seemed to be focused on simplification of their loan book, after pulling out of asset finance last year,” Turner said.
What’s behind Macquarie’s change?
In an email to brokers, seen by Broker Daily, the lender listed the “emergence of strategies on social media aimed at maximising lending through trusts and companies” as a reason for the decision.
Upcoming anti-money laundering Tranche 2 regulations, which will require additional verification steps for trust and company loans (making the origination process more complex and time-consuming for banks, brokers, and customers), were also cited as a reason.
Emerge Finance director and mortgage broker Adam Bradley told Broker Daily: “It’s a big shame – particularly the reason for it. There’s obviously been some influencers or people trying to muck around with the system so that people are getting additional borrowing capacity.
“But for the most part, I think everyone’s doing the right thing.”
Loisance added: “The whole Industry is concerned over ‘spruiker strategies’.
“The rise of social media-driven lending tactics encouraging borrowers to use trusts or companies to bypass serviceability limits has raised red flags across the sector for a long time.”
Reflecting on the change, Go Mortgage Brokers owner and founder Xavier Quenon said: “I think it’s a shame that Macquarie are stopping that avenue, because they’re specialists in the area.
“It sounds as if the two main motivations for stopping are concerns about influencers doing the wrong thing and pressure from government regulation. So it seems the red tape will generate worse outcome for customers.”
Will other lenders follow suit?
Asked whether other lenders will stop giving loans to trusts and companies, Turner told Broker Daily that he thought more would follow.
He noted that he had noticed a recent change in lender appetite for trust and company structures and flagged that St.George Bank had “pulled right out of this area and now does not offer pricing for new lending, which has really impacted some of my existing clients with them”.
Loisance stated that “of course”, some lenders would also stop new lending to trusts and companies, while others would tweak policies.
“Lenders may not stop altogether but may apply more scrutiny. They may introduce stricter documentation, higher servicing buffers, or limit LVRs for trust/company borrowers. We have seen this already for the past year,” Loisance said.
Both Bradley and Quenon said they thought other lenders would take advantage of the change.
“There’s an opportunity for other lenders,” Bradley said.
“I’ve already talked to some lenders who have said they are now talking internally about how they can improve their credit policies to try and soak up some of that business. So, one door closes, another one opens.”
How will it affect brokers and lenders?
Quenon said the change would impact Go Mortgage Brokers.
“We’re definitely going to have to find another partner in a space to replace the volume for this business. At my brokerage, we probably send 20–25 per cent of our trust loans to Macquarie,” Quenon said.
Bradley noted that clients purchasing through a trust was not uncommon.
“As a broker, whenever we have investor clients that are looking to buy an investment property or an additional property in trust, we typically see that their accountant has recommended setting up structures for tax purposes or asset protection or income distribution. That is a pretty common occurrence for people to be purchasing in trust,” he said.
“The other thing that was quite a shock is the speed at which they have turned this off, because we’ve got clients in the pipeline that we’ve been preparing to send to Macquarie for these applications, and now we’re having to pivot.
“That’s not ideal from a customer experience perspective. It’s not their fault, and it’s not our fault.”
Loisance added: “As a broker I see an opportunity to debunk myths, guide clients through structural choices, and highlighting the importance of responsible lending.”
[Related: Macquarie Bank to pause new lending to trusts and companies]
