Margin loans feed credit demand
Investors are rushing to secure margin loans, the latest product to feed the nation's appetite for credit. Margin loans have soared 21 per cent in the 12 months to March to $12.9 billion with investors attracted by low rates, a booming stockmarket and a proliferation of products.
Macquarie Bank says its margin lending business grew by 30 per cent last year, with more younger and “mid-market” investors taking up the loans. It offers a start-up loan for beginners, with a $1,000 minimum. The largest margin lender, CommSec, offers loans linked to home loans.
Infochoice says investors may be lulled into a false sense of security with these loans: most new margin loan investors haven't experienced a margin call. But just as people are finding with property, the market doesn't always go up. Investors should be prepared to either pay in more or sell down in the event of a margin call.