Stability in SMSF lending spurs broker opportunities

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THE SELF-MANAGED superannuation fund borrowing landscape in Australia presents a curious paradox. Despite rising interest rates and economic uncertainty, this sector has demonstrated remarkable stability – perhaps because it was designed that way from the beginning. “The SMSF borrowing market has been with us for over 17 years and is now a mature segment with new assets being purchased, loans being paid down or the property sold,” says Richard Chesworth, head of specialised distribution at Bluestone Home Loans. “It’s also worth highlighting that there is now over $72 billion of assets securing SMSF borrowings totalling $27 billion, so the limited recourse borrowing structures have really framed a conservative lending position, supporting the longevity towards building retirement savings.”

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Richard Chesworth, Bluestone Home Loans

This conservative foundation explains why the SMSF lending sector hasn’t experienced the volatility seen in other lending markets during recent economic shifts. The regulatory framework itself prevents many of the excesses that might otherwise occur. “One aspect I enjoy about the SMSF lending segment is the clear parameters on what can and can’t be done,” Chesworth explains. “While this limits the ability to innovate in the segment, it shifts the focus to the importance of partnering with a lender that supports mortgage brokers on what can and cannot be done from a credit advice perspective to the end user.” While the broader lending environment grapples with volatility, SMSF borrowing stands apart thanks to its carefully regulated structure and conservative lending practices. This inherent stability not only preserves retirement savings but also sets the stage for a more nuanced discussion – where mortgage brokers must look beyond headline rates to truly support their SMSF clients.

For mortgage brokers, the temptation to focus exclusively on interest rates when comparing SMSF lending options can be significant – but potentially misguided. Chesworth warns that not all SMSF lenders bring the same level of expertise to the table. “We have seen in recent years several new lenders enter the SMSF lending market, and in some instances there’s limited knowledge beyond their actual product, which impacts the support back to the broker and their customer,” Chesworth says. “What’s also of concern is some have innovated with new product features that, if used the wrong way, can present significant compliance issues to the SMSF.” The emphasis on compliance reflects the unique position SMSF lending occupies at the intersection of credit and financial advice – a distinction brokers must navigate carefully.

One notable shift in the market has been the gradual decrease in the average age of SMSF trustees. This demographic change stems from structural factors in Australia’s superannuation system rather than passing trends. “We are seeing younger members in the SMSF space, which is influenced by increased superannuation savings, as throughout their working life employer super contributions have been a requirement, and that’s increasing to 12% of their wage from 1 July 2025, from just 9.5% in 2021,” says Chesworth.

Perhaps the most overlooked opportunities in SMSF lending today isn’t new loans but refinancing existing SMSF loans – an area where brokers can deliver significant value. “Given the lending purpose restrictions in the SMSF borrowing rules, these loans have become passively managed, and brokers play a paramount role in actively driving the refinance opportunity,” says Chesworth. “This not only gives you access to clients – the SMSF loan is only part of the opportunity with that client where you can help.” The financial benefits for trustees can be substantial. Many existing SMSF loans were established in higher interest rate environments and haven’t been reviewed, leading to unnecessary costs. “We’re seeing interest savings of tens of thousands of dollars a year back to the SMSF through refinancing the SMSF loan or alternatively restructuring loans that may be on restrictive terms which really impact cash flow capacity of the members or the SMSF,” Chesworth explains. This refinancing focus aligns with the broader economic context for SMSF property investments, which have generally performed well over time. “The growth in asset values securing SMSF loans has well outweighed the growth in borrowings, which is a real plus for an SMSF, as in many cases that asset will be in a positively geared territory with the increase in rental income, which works so much more favourably for the fund in the favourably low tax rates of superannuation,” says Chesworth.

“We have seen in recent years several new lenders enter the SMSF lending market, and in some instances there’s limited knowledge beyond their actual product, which impacts the support”

“SMSF lending isn’t complex if you have the tools to understand it. Our focus is to give brokers the confidence, support and tools to expand into SMSF lending”

Despite economic uncertainty, SMSF lending remains steady. Brokers who understand its nuances can unlock refinancing opportunities and build stronger client and adviser relationships

This generational shift presents both opportunities and challenges. Younger trustees often bring different investment perspectives and time horizons, yet the fundamental structures of SMSF lending remain constant. “Trustee needs haven’t really shifted over the years as it’s really guided by the clear regulations, but what’s important is being consistent in our approach to support our brokers and end customers throughout the lending process,” Chesworth says. Bluestone has responded to this younger demographic not by changing core product features but by adjusting risk parameters where appropriate while maintaining minimum asset requirements.

0.6%

SMSF membership breakdown by age

The compliance requirements of SMSF lending remain among the most challenging aspects for brokers, particularly regarding the boundary between credit advice and financial advice. “Both an SMSF, and when discussing property within an SMSF, are considered a financial product under the Corporations Act, so it’s important to ensure your discussions always relate to credit advice and don’t drift into financial advice,” Chesworth cautions. “This includes not making a recommendation to establish an SMSF, or that borrowing to purchase a property is a suitable investment for their customers’ superannuation requirements.” Brokers must maintain awareness of these boundaries while coordinating with the trustee’s other advisers. “Should an issue arise such as a contribution need, or the timings of executing trust deeds, brokers may consider framing the point as a question for their customer to engage their other licensed advisers. At the end of the day, a well-managed SMSF has the support of a team of competent advisers,” says Chesworth.

Beyond rates and fees

The young-trustee phenomenon

The refinancing opportunity

Published 05 May 2025

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The perception of complexity remains one of the biggest barriers preventing mortgage brokers from engaging with the SMSF lending sector. Bluestone has made broker education a centrepiece of its strategy to address this challenge. “It’s surprising how many brokers still haven’t ventured into the SMSF lending segment, as they’re of the view its complex,” Chesworth says. “In our education sessions we remind them that their first home loan was complex. Their first investment property loan or trust loan felt complex. SMSF lending is no different: when once you complete a few, the broker is then demystified and more comfortable in dealing with SMSF needs.” This educational approach reflects Bluestone’s philosophy that product providers have responsibilities beyond simply offering financing options. “Bluestone’s philosophy when it comes to SMSF lending is that if you’re providing a product to the market, we also have a responsibility to educate and support our business partners,” says Chesworth. “A consistent message in our broker education series is that SMSF lending isn’t complex if you have the tools to understand it. Our focus is to give brokers the confidence, support and tools to expand into SMSF lending.”

For brokers willing to develop expertise in this area, the rewards extend beyond individual transactions to include stronger referral relationships with accountants and financial advisers – who themselves benefit from having informed lending partners. As the SMSF lending market continues its steady growth, the opportunities for well-informed brokers remain substantial. Despite interest rate fluctuations and economic uncertainty, the structural foundations of SMSF borrowing provide a reliable stability that makes this sector attractive. “For Bluestone, the outlook remains consistent, and we see continued growth of our lending portfolio.”

Total funds invested in SMSFs hitting highs

Source: ATO SMSF quarterly statistical report, December 2024

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IN Partnership with

Source: ATO SMSF quarterly statistical report, December 2024

25-34

2.7%

35-44

11.7%

45-49

9.3%

50-54

12.1%

55-59

12.3%

Navigating compliance boundaries

Richard chesworth, Bluestone Home Loans

The education imperative

60-64

13.1%

65-69

11.8%

70-74

10.5%

75-84

13.4%

2.7%

$1,000,000

$925,000

$850,000

$775,000

Jun21

Sep21

Dec21

$700,000

Mar21

Mar22

Jun22

Sep 22

Dec 22

Mar 23

Jun 23

Sep 23

Dec 23

Mar 24

Jun 24

Sep 24

Dec 24

Quarter

<25

85+