As at September 2009, the value of total margin debt outstanding was $18 billion, roughly half that at its peak in December 2007 ($38 billion).
Margin lending grew rapidly between September 2000 and December 2007 rising from about $7 billion to a peak of $38 billion. During 2008, a significant amount of the growth in margin loan outstandings was unwound, as volatile and generally falling share prices reduced the demand for new margin loans and caused a sharp repayment of existing margin debt.
The total number of accounts was little changed, but the average loan size declined substantially - from $190,000 in December 2007 to $85,000 in September 2009 - as many borrowers repaid their loans partially or fully.
Margin lending debt has grown as a share of total household debt, but remains relatively low at less than 4%.
The share of households’ direct holdings of equity financed by margin lending increased from about 3% to 9% over this period.
Variable or fixed rates
As at September 2009, about two-thirds of outstanding margin debt was at variable rates. The remaining debt was at fixed rates.
Leverage
Investors substantially reduced the leverage on their loans over 2009. Lower margin debt levels, combined with gains in the value of the underlying assets (as equity markets began to recover) saw borrowers’ average gearing levels decline by about 15 percentage points, to 35%.
Margin Loan Collateral
Most of the collateral backing margin loans is Australian equities and investments in managed funds, with these assets accounting for about 70% and 20% of total collateral respectively. However, over 2008 there was a significant increase in the use of residential property as collateral, with its share rising from 3% to 11%.
As at September 2009, almost 40% of individual borrowers had more than 20 stocks in their portfolio and a further 15% had 10–20. Borrowers’ portfolios tend to be mainly invested in large liquid stocks, with most lenders reporting that borrowers’ largest equity exposures were to the major domestic banks and large well-known mining and industrial companies.
Credit limits
As at September 2009, the maximum margin loan credit limit in aggregate was $53 billion, 30% below its peak in March 2008. The decline mainly reflected some borrowers closing their accounts and lower approved credit limits for the remaining borrowers following declines in the share market. The share of this credit limit actually used by borrowers remained low at about 35%.
