Thoughts on Athena

Good rates, free offset, no package fee... What's not to like?

Is anyone using Athena?
What are your thoughts on it?

Thanks

 

Anyone know whether its actually an offset as opposed to a subacccount / redraw?

 

A few observations from my perspective:

• Their credit policies are quite conservative (have had a couple of customers contact me after being declined by them) so you'd need to fit within their criteria.
• They went very quiet when COVID first hit (along with a few other lenders who were perhaps concerned about their funding) but came back aggressively a few months later.
• Their current fixed rates are not competitive.

I do wonder if their long term plan is to be acquired or go IPO (have a look at some of the players who have invested in them).

 

They're a non-bank lender with strange policies, tougher serviceability hurdles, LVR restricted to 80% maximum, and therefore not suitable to all borrowers.

Athena's offset account is not a true offset account as Athena is not an Authorised Deposit taking Institution (ADI) meaning any money 'in' the "offset" is not covered, if they go bust your money goes with them.

 

Thanks, I didn't know this. Isn't it Pepper Money the same (non ADI)?
I have a loan with Pepper and have lots of money in the offset, pretty scary!

 

Lindsay is this actually true? I thought there was actually no risk, as long as your debt balance with them is greater than the amount in your offset. Does not make sense that your money will go if they go bust, if you have debt with them. Debt gets cleared first?

 

Yes it is actually true.

A lender can decide to take money from your offset to reduce your loan at any time. ME Bank did it about 18 months ago. All of a sudden people lost the money they thought would help get them through the pandemic.

If he lender went bankrupt, there is no government guarantee that you'd recover your money from any accounts you have with them. Most likely your loan would be reduced accordingly, but I honestly don't know for sure. If your loans were unilaterally reduced, you might find yourself missing out on a lot of tax deductions and it could wreck your investment strategy.

 

Isn't me bank an ADI lender? Sounds like this could happen at any bank then, not just non-ADIs

 

Wasnt the ME bank thing that they closed redraws without warning? Not offsets.

 

ME is an ADI. I think you might be confusing two concepts people are discussing above. ADIs have a government guarantee of your money. So if they go bust, your money is claimable. Non ADI don’t have that. So because ME bank is an ADI guarantee applies.

Second concept is true offset and a redraw that’s called an offset. In true offset, people have a seperate bank account, that usually can be ONLY with an ADI. Money in offset is protected and cannot be touched. In redraw, and non true offset, money is actually held against loan. So it’s not separately banked money with ADI. The lender might, at their whim and depending on the contract T&Cs, block, take or apply that money against a loan. ME didn’t have a true offset, hence the ability to apply money against loan.

The worst scenario discussed is when a non ADI (read non APRA monitored / regulated) lender goes bust. Because they are non APRA,arguably there is no supervisor to ensure they keep particular capital adequacy. Could mean that loan remains as is and money in account is gone with the bankrupt entity.

That said, I think that last scenario is highly unlikely providing that balance of loan is higher than redraw. More likely that the loan is on sold or factored as Nett (Loan-whatever money in redraw) to someone else.

Forth, and more likely risk, is when the loan is on sold, the buyer usually can increase the rate as they wish, say 5% etc. Because these lenders are not APRA regulated, I view their default risks as much higher than ADIs

 

Where have you seen this raised as even a possibility?

 

In theory...

 

Several small lenders went under during the GFC with various outcomes.

 

which one(s) went under and borrowers lost money from their 'offsets' while still owing the entire balance of the loan? e.g. the mortgage is 500k, 'offset' is 50k, the lender goes down and the borrower comes out of it losing the 50k and still owe 500k?

 

I suggest you read this as a start. Which is highlighted as the base scenario. Alternatively, if you think otherwise this is impossible feel free to provide your view rather than "where". If something didnt happen, doesnt mean it will not happen.

 

ME bank took the money people had in redraw not offset accounts
That's why I always recommend true offset accounts over redraw, even though some people will try to say 'they're the same thing', they're not, and when non ADI leaders call them 'offsets' it's very misleading.

 

Pepper Money is non ADI, they're 'offset' is not an offset but more like a redraw offset.

 

I called Athena as am thinking of refinancing my ppor, and cash out equity for investment purposes. They don’t do split/separate loans yet so not sure how can keep interest separate for tax purposes