The federal government is investing $3.4 billion in residential mortgage-backed securities (RMBS) issued by five non-bank lenders in a bid to ramp up competition in the mortgage market.
The fresh boost was a part of the government's second $8 billion investment in the non bank sector. The new fund will buy RMBS issuances by Liberty Financial, Resimac, Members Equity Bank, Firstmac and AMP Bank.
Australian Treasurer Wayne Swan said the government's investments to date in RMBS have enabled smaller lenders to lend at competitive interest rates and maintain a higher level of lending than would otherwise have been possible during the global financial crisis.
"Today's announcement provides more funding certainty for these smaller lenders and will allow them to keep lending. This will place more competition on the big banks, helping to put downward pressure on mortgage rates over time," he said.
Today's announcement provides for up to $3.4 billion in 'pipeline' funding - meaning that each of these smaller lenders will have the Australian Office of Financial Management (AOFM) support for RMBS issuances until up to 15 December this year. This is the first time the AOFM has announced that it will invest in multiple RMBS issuances by each of these smaller lenders. This will mean these lenders will no longer need to submit separate tenders to the AOFM for each proposed issuance, providing greater funding certainty."
Swan added that the government's direct investment of up to $16 billion in the RMBS market has been critical to preserving the infrastructure of this important market and is fostering a recovery in private investor confidence.
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