CANSTAR analysis has found that the average number of ASX companies on financial institutions’ acceptable securities lists has risen quite significantly since the height of the GFC, indicating that institutions are comfortable taking on a higher level of lending risk. “One broad way in which a financial institution can reduce margin lending investment risk is to reduce the number of acceptable securities,” said CANSTAR Research Manager, Mitchell Watson. “CANSTAR analysis has found that just prior to the GFC, the average number of ASX securities on the acceptable securities lists of the financial institutions we rate was 520. This number had plummeted to an average of 390 by December 2009. Even by December 2012 the average number of securities was only 419, but by December last year that number had risen to 446 securities. This perhaps indicates a more optimistic economic outlook.”

While the average number of acceptable securities overall saw a marked decline, the average number of ASX 200 companies on the acceptable securities lists remained resilient throughout the GFC. Page 2 of 3

CANSTAR today released its margin lending star ratings report, awarding five stars to outstanding lenders in two profiles – Share Investor and Managed Fund Investor. CANSTAR margin lending star ratings is a consumer-friendly benchmark that compares both the price, including the interest rate and fees and charges, and features, including the maximum LVR, the number of shares/managed funds offered, repayment options and other account features. Five-star lenders are considered to offer outstanding value for money. There are three five-star products in each of the Share Investor, and the Managed Fund Investor profiles.

Share Investor profile

Within the Share Investor profile, ANZ, CommSec and St George achieved a five-star rating, all maintaining their position from last year.

ANZ’s rating is driven by its acceptable securities score, providing lending on both the highest number of ASX 200 stocks and the highest number of stocks overall. Currently, ANZ provide lending on more than 700 stocks, which is significantly higher than the industry average of 446 stocks.

CommSec maintains superior product features with good direct client services including an unlimited transaction history, “what-if” calculators and weekly newsletters. They notify clients within 24 hours when in buffer. They also offer trading in options and warrants.

St George offers investors a good balance between features and price. On the features front, St. George offers periodic statements, “what-if” calculators and the ability to trade options among many other features to its clients.

Managed Fund Investor profile

Within the Managed Fund Investor profile, CommSec, CommSec Adviser Services and St. George all achieved a five-star rating.

Both CommSec and the advice model, CommSec Adviser Services, maintain superior product features, with the Adviser Services model providing a wider range of acceptable securities than the purely DIY model.

St George achieves the top score for acceptable securities. They have an extensive acceptable securities list with lending offered on 1,811 funds. This is significantly higher than the industry average of 1443 funds. They also offer a buffer margin of 10%.

Consumers can download the full Margin lending star ratings report on www.canstar.com.au

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CANSTAR issue advice to shop around ahead of RBA rates review.

Commenting ahead of the RBA announcement, Mitchell Watson, Research Manager for CANSTAR said:

“Last week Reserve Bank Governor Glenn Stevens gave a speech in which he called the end to the investment growth phase of the mining boom. He stated that there is no natural successor to that growth at the moment and monetary policy may need to encourage non-mining investment. He also stated that the current inflation outlook provides scope to ease further. Markets do seem to have interpreted those comments as a likely call to action this month.

It is interesting to note, though, that over the past twenty years interest rates have been lowered during only one election campaign period; in 2001 when rates were lowered by 0.25% two months in succession. In other words, only one of the past seven election campaigns has seen an RBA movement downwards on rates.

The recent fall in the value of the Australian dollar against the greenback has taken some pressure off the RBA, however Glenn Stevens did note last week that we need to raise business confidence and raise household confidence from their current levels in order to find that mining boom successor.

Irrespective of the RBA decision, consumers should still question whether they are getting the best deal available for their borrowing needs. On our database for example, the average standard variable rate is currently 5.71%, but the lowest variable rate on our database currently is 4.74%. Now, a mortgage holder with a $300,000 mortgage over 25 years who did their own research and switched from an average rate to the lowest rate could potentially save themselves more than $170 per month and more than $50,000 over the life of their loan.

So the message for all borrowers is to know your rate, the features and benefits of your loan and shop around.”

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