Macquarie Prime - margin lending

[Ridin-High]

Howdy all,

just came across an online ad for MQ Prime.

The products on face value seem alot better then competitors i'll give a quick comparison below

CBA

LVR: 80% (portfolio LVR, 5 stocks or more, 80% LVR basically only on Bluechips)
Variable rate: 9.1%

The stocks i purchase they give lending ratio's of 65% and 60%

MQ Prime

LVR: 90%
Rate: 8.35%

The stocks i purchase they give lending ratio's of 90% and 75%

anyone use MQ Prime, could you provide feedback? Is their a catch to this. The higher lending ratio gives me a higher net of safety from margin call and the interest rate is obviously a saving of $$$

Regards,

RH

 

[Intrinsic_Value]

Two words of warning:
(a) obvious: this is very much a stock pickers market rather than a 'market to be in'. Becareful out there with margin loans.

(b) less obvious: whats to stop Macquarie changing the LVR ratio's if things get tough. Macquarie has a history of 'marketing' its products very well, but when risk comes into play, they change the variables very quickly and stuff the long term customer relationship. Remember what they did with their residential mortgage operations during the GFC.

Personally i would be wary of using Macquarie.

 

[Ridin-High]

Copy that IV, thanks for the info/feedback.

 

[Bigtone]

i had maquarie margin loans and they sold the book to levereged equities during the GFC.

they did often reduce LVR's but if u already owned the stcok they did not change it on those borrowings, if you bought more then the new LVR applied.

some of the stocks went from 60% LVR to 0% overnight during the GFC

 

[Ridin-High]

Cheers Big T,

yeah that scenario would certainly suck the big one.

I only have two stocks which are listed investment companies (AFI and MLT for anyone wondering) and have margin loans against those.

Regards,

RH

 

[Tom-B]

I was also with Mac during the GFC. I held a large position in OZL (deceitful scumbags) that got brought down to 0 percent lvr during the GFC. I sold the lot and took a 45k bath. Once bitten twice shy on margin lending. Things can get ugly VERY quickly.

 

[BayView]

Margin loan, Stocks, 90%LVR - all in the same sentence - is scary....even 80%.

 

[Intrinsic_Value]

Margin loan, Stocks, 90%LVR - all in the same sentence - is scary....even 80%.

in fairness very few people will take it to the margin (not unless they want weekly margin calls).

A bit like property whereby a person thinks, i've got 50%LVR the bank lends 80% relatively easily, so i have that 30% margin buffer. So do people look ar margin lending LVR with a view to a 'buffer'

But unfortunately with stocks, those margin LVR can change, and the time during which they change tend to coincide with market turmoil: just the time when one is relying on the previous LVR.

So long as one is making mortgage payments, the bank tends to ignore you, not so with margin lenders.

 

[Tom-B]

My LVR was less than 50%. Equities are more fluid then ever these days, and being leveraged, even less than 50% during the GFC was a wild ride that I would not wish on anyone. Even if you are at 80% on an IP the effect of a declining market is nowhere near as brutal.

 

[kero]

i have been using Prime for a number of years and only realise few months ago that they are not allowing shorts on CFDs... even for RIO and BHP.

 

[GlennG]

Does anybody understand why shares are bought on margin rather than using a loan raised against one's home or IP? Surely it's better to have a lower interest rate.

Is it because people want to put everything they can borrow into further IPs - or am I missing something?

 

[VYBerlinaV8]

I have a St George margin loan. The product is good but the service poor.

During the GFC I was margin called twice. This didn't bother me particularly because my strategy with shares is to gear right up (80% or thereabouts) and manage the risk by having plenty of available cash.

 

[Ridin-High]

Does anybody understand why shares are bought on margin rather than using a loan raised against one's home or IP? Surely it's better to have a lower interest rate.

Is it because people want to put everything they can borrow into further IPs - or am I missing something?

GlennG some people do both, use equity in their house and when you don't have anymore use the margin loan to further burrow.

Depends how much exposure you want to the market and your personal risk tolerance.

VYBerlina, what interest rate can you get with St G? (variable in arrears)
this is listed on their website, don't know if you can get any better

$0 to $249,999.99 9.80% p.a.
$250,000 to $499,999.99 9.55% p.a.
$500,000 and over 9.30% p.a.

Regards,

RH

 

[avatar]

I am currently using Interactive Brokers and can go up to 50% LVR with my current account setup (I believe you can go higher with a larger asset base and different account type)
On Aussie stocks they are charging
6.256% - First 120k
5.756% - Over 120K below 1.2M
May be worth a look if you are considering changing.

 

[Peter_Tersteeg]

Financial planners are generally required to perform a risk profile assessment, especially when recomending margin lending.

An 80% or 90% margin loan would indicate an enormous tollerance for risk, even with other mitigants available.

 

[Corey Batt]

Thats a stupidily good rate..

 

[avatar]

http://www.interactivebrokers.com/en/p.php?f=interest

Here is a link in case you want to have a look.