Margin call rates have decreased dramatically and now sit around one in 1650, or 0.06 per cent, as opposed to one in 100, or 1 per cent, at the height of the global financial crisis, according to the latest review of the sector by Canstar Cannex.
The research house attributed the drop in margin calls mainly to the fall in market value of the stocks or funds contained within portfolios.
The heightened risk aversion among investors has also had an effect on margin calls and margin lending in general, with the average gearing level now standing at 32 per cent.
“Margin lending is still popular, despite its drop in popularity from 226,000 to 206,000 customers in the latter part of 2009,” Canstar Cannex financial analyst Mitchell Watson said.
“We saw opportunistic investors enter the market in 2009 to take advantage of the partial recovery, but they have since exited, leaving behind long-term investors.”
Canstar Cannex’s review of the margin lending sector saw the ratings house assess the products in the market using share investor criteria and managed fund investor criteria.
In regard to the share investor category, five stars were awarded to ANZ, Colonial Margin Lending and Commonwealth Securities.
Colonial Margin Lending and Commonwealth Securities also received five stars in the managed fund investor category and were joined by Leveraged Equities in this top group.
Canstar Cannex also found margin loans to be around 2 per cent more expensive than an average mortgage.
“The margin between the average interest offered through margin loans and the official cash rate has remained fairly constant, sitting at or around 4.86 per cent,” Watson said.
“This compares to home loan rates where the margin is 3.04 per cent above the cash rate.”
