Creative Financing / Risk Free Arb

Not sure how many of you guys do this if you have large stock portfolio but effectively with Aussie rates so low there is a risk free arb where you margin loan on your stocks (at a leverage level you are comfortable with). Not many people know this but interactive brokers is an industry platform many hedge funds use that gives you pretty much the cheapest financing.

You can see loans of $140k - $1.4m AUD is at a rate of 1.5%

Interest and Financing | Interactive Brokers

You can get a cash loan off your stocks and deposit it into an offset account and make the spread i.e. if your mortgage offset account is paying 3.5% you can make effectively 2% risk free a year if you are holding stocks.

 

These rates were only available to US residents the last time I looked.

Have you actually done this?

 

Yes I have money is deposited within 3 days, the rate is irrespective of domicile but based on the currency you are borrowing in.

Main thing you need to be careful of is the LVR you take out as obviously stock portfolio can be volatile.

 

To clarify though I have an overseas account which I use (asia based) but i checked the interactive brokers australian website it shows the same thing.

 

I used to use IB a lot when I was in Singapore. It was great. But once you are based in Australia and use an OZ bank account, there are a lot of restrictions.