Call for margin loans cools off

Investors have wound back their use of margin loans … but there are other options.

Margin loans are loans put together allowing people to borrow to invest in shares. They have a number of specific characteristics including that they will usually lend to a certain value against any security (the loan to value ratio), they can force the sale of your shares if the loan falls below this value (the margin call) and they generally have interest rates higher than a housing loan.

Currently, according to Reserve Bank of Australia figures, there is about $12 billion borrowed on margin loans – the lowest amount for 10 years. The following table charts the growth and subsequent decline of margin loans.

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