Macquarie offset has a limit?!

I have a macquarie offset account with $200k in it FULLY offsetting the $200k loan for my IP.

Would you believe what happens next? Instead of letting the offset continue to accumulate money, it starts rejecting all deposits! My tenants (who were depositing their rent) keep getting their rent back. This is totally stupid. I rang Macquarie and they confirmed that this is how it works.

Wtf!

 

Easy solution - transfer out some money before the rent is due - set it up to do it automatically.
Or, another easy solution - change the account your rent goes into. There's no point having an offset with more than the loan balance in it.

This is most likely due to the older Macq products not being a 'real' offset and not a separate account - it's very much linked to the loan. The new ones probably won't have this issue as they're an ADI now.

 

It's such a pain that I'll have to change all my rents, salary and direct debits, direct deposits etc and create a new account. Then there's always the fear that you forget one and literally miss out on money when it bounces back.

Can put man on the moon. Can't have a logical offset

 

I have a LOC with $60k to I'm keen to pay down (as it's the next bucket of debt for me to pay down).

Should I get the rents paid directly into this LOC? I figure I have enough cash elsewhere to use for personal use and would only reuse the cash in the LOC for other investment anyway

 

Instead of doing that can't you pull out say $10k every few months?

 

As long as you don't intend to redraw from the LOC for private purposes it should be ok.

But whey not just take $10k from the Offset and pay it into the LOC periodically.

 

The wonderful world of banking. Not a day goes by where I don't find myself shaking my head muttering "WTF"

Cheers

Jamie

 

That's what I'm currently doing Terry. I just don't know if I'm being a tightarse and wanting to avoid the $15-$20 interest I'm paying for doing it that way

 

You would be saving interest wouldn't you?
LOC has a higher rate so moving cash across would save you interest on the LOC and increase interest on the IO loan, but because of the higher rate on the LOC you would be ahead.

 

I'm sure Macquarie is thinking they're being very helpful in making sure their clients are not storing any excess funds in their offset which would not receive a benefit (interest saving or earning) - I can just imagine the product team high diving at such virtuous planning.

 

A bit silly to have it limited to the loan amount, maybe just a notification informing customers that there's nothing more to offset would have done the trick.

This is one example of strange product issues - there's product quirks all over the marketplace that make you wonder. Macq discharging process can be a pain, usually offsets turn into transaction accounts giving time to make adjustments to DD's, etc post settlement. Macq just close it down too, which can make it a relatively painful process to refi out from (especially if its the main account).

 

Liberty's offset closes the loan account if it's fully offset.

 

Is that because it is secretly a redraw facility?

 

It would certainly seem that way. But the weird thing is their redraw system is actually much easier to use than their offset, which also isn't transactional.

 

Actually, my LOC is 4.39 and my IP loan is 4.91. Macquarie have been hiking the IP rate all year but no change to the LOC rate.

 

In that case transfer smaller amounts over to the LOC so as to save interest.

 

Yes that makes sense now - thank you

 

I believe this stems from the system Macquarie implemented in the days when they were a CMT and not a ADI. They arent allowed to receive more to a loan offset than its balance as that would be a deposit.

They arent the only lender with the issue. Some lenders do have a policy to limit a offset to the sum of the loan to avoid it being designated as savings. Different APRA regulations require it to count to capital adequacy rather than offset a loan.

Its a bit similiar to some banks having a minimum balance. Some will close out a loan when its balance gets to $19.99 and others when its $0.00. Undrawn loan facilities count to APRA capital adequacy stats requiring asset backing where a closed account doesnt.

And I bet few lenders have anyone who knows the small print rules

 

Good news is that I rang and got a lower rate on both my IP and LOC. Even the Macquarie guy thought the offset limitation was ****!