Investors could find themselves better off under capital protected borrowing (CPB) rules which potentially reduce the cost of investment.
The CPB rules broadly limit the borrowers' interest deduction to the Reserve Bank of Australia's (RBA) personal unsecured loan variable rate and were activated on July 1, replacing interim methodology announced by the Treasurer four years ago.
"For example, investors on a five-year protected loan with an interest rate of 13.1 per cent per annum (pa) could potentially get an interest deduction up to 13 per cent pa, the current RBA personal unsecured loan variable rate, compared to only 11.13 per cent pa under the interim methodology," Macquarie Investment Lending head of sales and marketing Peter van der Westhuyzen said.
Some advisers indicated they had held off from placing clients into capital protected products (CPP) until the new ruling came into force, van der Westhuyzen said.
"At a time when people are starting to question the sustainability of the Australian market's record performance, CPPs can give some investors a level of comfort that they can still borrow to invest without the risk of losing their capital if they hold their investment until maturity," he said.
