A recent letter to the banks from the regulator, APRA, saw the financial media light up with doom and gloom about borrowing by self-managed super funds (SMSFs). ‘APRA warns banks on loans to SMSFs’ was a typical example.

Except that APRA didn’t. It was a classic media beat up. APRA’s letter, a clarification of how SMSF loans should be treated for regulatory capital purposes, simply advised they wouldn’t get the more generous treatment applied to normal home loans.

Despite APRA stating that SMSF loans may have a ‘potentially higher loss profile’ I doubt the letter was a shock to the banks and it wasn’t much of a warning. APRA themselves pointed out that it was the banks’ job to assess the risk of their lending.

If you’re borrowing in your SMSF you don’t need to stress about APRA raining on your parade. But there are a few issues you should consider.

Firstly, there’s the Cooper Review into superannuation, which suggested that SMSF borrowing be reviewed. If the practice was to be banned or limited going forward, the banks might seek to exit the business, pushing interest rates upwards and making refinancing virtually impossible.