LRBA stability has been understated

The stability of limited recourse borrowing arrangements (LRBA) within SMSFs has been understated, with their track record highlighting their longevity and safety compared to other forms of property lending, a non-bank lender has stated.

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Bluestone head of specialised distribution Richard Chesworth said in dealing with mortgage brokers, accountants and financial advisers he has emphasised official numbers demonstrate the settled nature of SMSF borrowing.

“When you look at the ATO statistics, the size of the market, as in assets secured by LRBAs, has generally been between 6.5 and 7.5 per cent [of the total value of all SMSF assets] since about 2020, so it’s consistent,” Chesworth said.

“In regards to the debt, there are about 11 per cent of SMSFs with exposure to LRBAs, and at June 2024 there were $67 billion of assets under LRBAs with about $27 billion worth of debt against them.

“So the real message I like to drive home is this market is established. It’s been around for 19 years, which means we have SMSF loans that have been repaid. We have SMSF loans where the property has been sold.

“I don’t see it as a new safe haven that everyone is looking into, which is where some commentators with a vested interest in the lending for property are going down the path.”

He added these statistics countered criticism of the SMSF sector using LRBAs, noting they were relatively safer, in terms of failure rates, than other forms of lending.

“The LRBA market is mature, is operating well and is low risk because we’re looking at about a 33 per cent gearing of the overall portfolio,” he said.

“I was in a S&P presentation last year and figures they put forward showed that residential mortgage-backed securities had a 30-plus-day default rate of just over 1 per cent, but the SMSF residential mortgage-backed securities had a default rate of over 30 days of 0.1 per cent.

“That default can often be as simple as someone has set up their loan, but haven’t got their direct debit set up properly, so they miss their first payment and it’s reported on that basis.”

April 23, 2026
Jason Spits
smsmagazine.com.au