At a time of ultra-low interest rates, it’s still possible to get a decent return without taking unnecessary risks
A combination of factors has driven greater investment in mortgage trusts, but the industry believes Australians remain under-invested in this sector. Retirees, people with self-managed super funds and others seeking capital stability as well as consistent income have pushed the recent growth, while the credit squeeze by the major banks has provided opportunities for the non-bank sector to offer good returns at reasonable risk.
At the same time, according to Louis Christopher, managing director at SQM Research, the chase for yield has increased the risk appetite of investors.
“Mortgage trusts are attracting borrowers on a slightly higher risk spectrum, paying 5%-6% or a little higher,” he says. “It doesn’t mean the borrowers are problematic but banks have restricted lending to mums and dads and have also been hard on self-employed people.”
Because the major banks have been tightening their criteria and screening borrowers more stringently, the non-bank sector has picked up some “very good risk-free loans”.
“Often they’re borrowers who have gone through that tougher experience with the major banks and are fed up, so they’re willing to pay a little bit more for the greater convenience,” says Christopher.
Who’s investing?
Chris Andrews, senior vice-president and chief investment officer at La Trobe Financial Services, says the mortgage trust product is a natural fit for older investors.
“Classic investment theory states that an investor should ‘own their age’ in fixed-income investments,” he says. “That is, the older you are, the more your portfolio should be tilted towards capital-stable, income-producing investments.
“A 60-year-old should have 60% of their portfolio in such investments, a 70-year-old should have 70%, and so on.”
Bu hikaye Money Magazine Australia dergisinin June 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Money Magazine Australia dergisinin June 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
An outrageous, beautiful monopoly
Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.
Drop the anchor to judge value
Buying and selling decisions should be based on where a stock price is going, not where it has been.
Powering the AI boom
Beyond the software and chipmakers, where will the energy come from?
Get into life
Tucked inside super are products that can protect you from life's inevitable uncertainties.
Paths to home ownership
Taking the road less travelled can sometimes deliver unexpected benefits.
Sold! Quick ways to add value
Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.
Money lessons the kids need to know
Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.
Property-investing rules: are they likely to change?
The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.
What's love got to do with it?
A rollercoaster of emotions could be driving poor crypto behaviour.
Are we ready to be cash-free?
Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.