Australia mortgage securities offer cheaper funding, says Swan

WELLINGTON: Australia’s market for residential mortgage-backed securities is becoming a cheaper source of funding for institutions lending to the housing market, according to Treasurer Wayne Swan.

The ratio of private funding in securitisations supported by the Australian Office of Financial Management has increased to 81% this year from as little as 25% in late 2008, Swan said in an emailed note on March 28.

Australia’s regional banks and non-bank lenders rely more on securitisation as a funding source than the nation’s four biggest institutions. In January, the government announced a A$3.4 billion (RM10.16 billion) investment in mortgage-backed securities sold by five lenders, to encourage participation and narrow the interest-rate spread.

“This government’s support is giving private investors the confidence to invest increasing amounts of their own money in the market, which many smaller lenders rely on heavily to make home loans,” Swan said on March 28. “Narrower spreads mean cheaper home-loan funding.” – Bloomberg LP
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