Govt under pressure to inject funds into AOFM

The federal government is under pressure from the housing sector to inject more funds into the mortgage market to stimulate competition.

A total of $6.7 billion in funding from the Australian Office of Financial Management (AOFM) has already been invested in RMBS.

The program was announced last September and involves the government acting as a cornerstone investor to help get deals off the ground, despite the effective closure of the RMBS market.

An inability to sell RMBS has hampered the capacity of regional banks and non-bank lenders to write new mortgages, resulting in the Big Four banks increasing their market share to more than 90 per cent, The Australian Financial Review reported.

There is growing industry speculation that the government will pour another $8 billion into the AOFM scheme when it finally runs out.

Suncorp and Greater Building Society were mandated last week as the next recipients for AOFM funding, leaving one more selection round before the funding dries up.