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Government to boost non-bank sector

Staff Reporter 2 minute read

The industry has welcomed a $4 billion government plan to bolster competition in the mortgage market.

Federal treasurer Wayne Swan announced on Friday that the Australian Office of Financial Management (AOFM) would purchase $4 billion worth of Australian mortgage-backed securities in a move to reinvigorate competition in the local mortgage market.

Under the plan the AOFM will purchase two $2 billion tranches of AAA rated RMBS.

Mr Swan said the purchases were likely to be subject to a “per-issuer cap” which would ensure the facility was available to a wide range of lenders.

“This initiative demonstrates the government’s determination to promote the efficient operation of Australia’s financial markets and to ensure robust competition in the  mortgage market to put downward pressure on mortgage interest rates,” Mr Swan said.

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MFAA CEO Phil Naylor was quick to stress the significance of the announcement.

“A competitive lending market is vital to make sure consumers get the best variety of products, the best service and the lowest interest rates. 

“The lack of available credit at the moment has severely impacted non-bank lenders in particular, because they don’t take deposits from their customers like the banks,” he said.

While the industry awaits further details of the plan, Lisa Montgomery, Resi Home Loans head of marketing and consumer advocacy, said the government’s faith in the non-bank sector was clear.

“We don’t really have a lot of details on the plan just yet, but it appears to be excellent news,” she said.

“We have been lobbying the government for support for market competition for some time and this announcement shows they are listening and willing to back the non-bank sector,” she said.

Published: 29-09-08

Is the government action enough to boost competition? Can non-banks compete more effectively on price? COMMENT HERE

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