Capital protected products to surge
Peter van der Westhuyzen
Macquarie Investment Lending is preparing for a flood of new capital protected lending product applications following the introduction of new rules to govern the products.
The new capital protected borrowing legislation replaces the Interim Methodology and is expected to increase returns to investors.
Macquarie Investment Lending head of sales and marketing Peter van der Westhuyzen said advisers had indicated earlier that they were waiting for the new rules to be implemented before putting clients into the products.
“For investors acquiring capital protected products from July 1, 2007, the new rules broadly limit the borrowers’ interest deduction to the Reserve Bank of Australia (RBA) personal unsecured loan variable rate,” van der Westhuyzen explained.
“For some investors, this might reduce their cost of investment when compared to the Interim Methodology.
“For example, investors on a five year protected loan with an interest rate of 13.1 per cent per annum could potentially get an interest deduction of up to 13 per cent per annum (the current RBA personal unsecured loan variable rate), compared to only 11.13 per cent per annum under the previous Interim Methodology.”
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