Margin lending: plenty on offer

It appears guests at the investing table continue to show little appetite for risk, no matter how attractively margin loans are plated up and presented.

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The most recent Reserve Bank Australia (RBA) statistics from September 2014 indicate there are now 147,000 margin lending accounts in the system, down from 156,000 in the previous 12 months. That′s a far cry from the heady days in June 2008 when account numbers soared to 248,000 – right before the crash we know as the GFC.

While it′s obvious that many investors removed margin loans from their portfolios and are yet to return to the market, some activity in the sector remains. Interestingly, the total value of margin loans has increased to $11.86 billion – up from $11.18 billion in September 2013 – and this suggests an increase in borrowing from the same players.

From our analysis it appears that financial institutions are also willing to lend – provided the choice of stock is good.  Our analysis of the eight providers included in the 2014 Star Ratings report has found the following current number of acceptable securities and current average LVR rates, both for securities in general and securities within the ASX200.

  Average percentage of total ASX companies on acceptable securities list Average percentage of ASX 200 companies on acceptable securities list
Company Average No. Companies Average LVR Average No. Companies Average LVR
Dec-14 428 63% 192 63%

Source: CANSTAR. Based on margin loan providers assessed for 2014 Star Ratings.

 

In terms of the total number of ASX companies listed, those figures translate to the following percentages.

                Average percentage of total ASX companies on acceptable securities list Average percentage of ASX 200 companies on acceptable securities list
Company No. Companies Average % No. Companies Average %
Dec-14 428 of 2,178 = 20% 192 of 200 = 96%

Source: CANSTAR. Based on margin loan providers assessed for 2014 Star Ratings. Average % rounded up to nearest whole number.

 

Provided it suits your investment needs – and it is essential to obtain professional and personal financial advice in this regard – margin lending does continue to be a viable and valued investment strategy for Australians.

CANSTAR′s annual Margin Loans Star Ratings report looks at both the cost and features on offer from a range of institutions. Those institutions offering an outstanding-value combination of price and features are awarded with our five star rating. Read our report for more details and compare margin loans here.

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