The US government’s bail-out of Fannie Mae and Freddie Mac may hurt American tax payers but the move has been welcomed by the Australian mortgage industry.
Martin North, managing consulting director of Fujitsu Consulting, told Mortgage Business today that the bail-out was undoubtedly good news for Australia and the Australian mortgage market.
“We should see a slight lift in confidence levels on the back of the takeover, and it should help interest rates come down,” he said.
Yesterday the S&P/ASX 200 soared on the news of the intervention, up 190.4 points, or 3.9 per cent, reflecting a significant boost in market confidence.
Mr North said the US government’s actions had averted a major global crisis.
“With funding sources having declined so significantly in the US, Fannie and Freddie were writing a substantial amount of loans.
“For them to have failed, it would have meant a global pandemic for financial markets,” he said.
Mr North said President Bush’s move was a clear indication of the “complex and dire difficulties” facing the United States’ mortgage market – with an end nowhere in sight.
Internationally, he said it would take “some uncertainty out of the financial markets”, but it wouldn’t solve the capital-raising difficulties facing many large institutions.
Australian institutions, he said, were largely unaffected by such international capital shortages as most had stopped raising capital overseas some time ago.
“It’s no silver bullet,” he said, “but it should contribute to a small recovery in the domestic market by mid next year.”
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