Peter van der Westhuyzen
Macquarie Margin Lending has launched a new investment loan aimed at middle income earners that has done away with the most unpopular feature associated with these types of products, the margin call.
The Macquarie Investment Multiplier is an Australian first and has been specifically designed to encourage Australians to begin the wealth creation process as soon as possible.
The offering was developed in response to feedback Macquarie sought from platform administrators and financial planning dealer groups in the market.
“What we’ve tried to do is take the best features of what is out there in terms of how you borrow to invest in the share market and strip away the worst features that are actually preventing people from borrowing to invest in the share market,” head of sales and marketing at Macquarie Margin Lending Peter van der Westhuyzen said.
The new product is a stand alone investment loan that will give investors exposure to 1,400 managed funds. Investors using the offering can borrow up to 75 per cent of their portfolio irrespective of the fund they choose and can contribute a lump sum along with monthly payments.
The initial interest rate charged on the Macquarie Investment Multiplier is 8.90 per cent and it will be priced in the same manner as the firm’s other margin lending products.
“The great thing is that the entry level can be as low as $1,000 of investor money upfront with an additional $250 contribution per month,” van der Westhuyzen said.
Furthermore, investors can receive a tax benefit from the product by paying the interest due in advance.
Instead of a margin call the offering has incorporated a principal repayment plan feature as a risk management measure.
“If the loan gets to the stage where it is more than 85 per cent of the portfolio we’ll ask investors to do three things. Firstly they’ll have to direct all the distributions to pay down the loan. Secondly they’ll have to pay back 1 per cent of the loan principal each month, and thirdly, if they have a monthly saving plan, we’ll stop the monthly savings plan until the gearing gets to 75 per cent again and then we’ll just start it up again,” van der Westhuyzen said.
Access to the Macquarie Investment Multiplier can only be sought through the services of financial advisers and the product is set to be included on most of the major administrative platforms including Australian Skandia, Colonial First State, Navigator, and Macquarie Wrap.
