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Liquidity facility rejected

Staff Reporter 3 minute read

The federal government has ruled out using some of the $8 billion it will inject into the residential mortgage backed securities (RMBS) market to provide extra assurance to purchasers.

Treasurer Wayne Swan rejected claims that a decision had been made which would allow RMBS buyers to sell their securities back to the Australian Office of Financial management (AOFM) for a fee.

“Given there are mixed industry views on the merits of a liquidity facility, I am not directing the AOFM to implement a liquidity facility at this stage,” he said.

In a press release issued by the Treasurer, Mr Swan said he had only given the AOFM the nod to officially invest a further $8 billion in RMBS to support competition in the mortgage market.

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“This investment is an important part of the government's commitment to strong and effective competition in Australia's mortgage market,” Mr Swan said.

“By supporting smaller lenders and promoting competition in the Australian mortgage market, this investment is helping to put downward pressure on borrowing costs over time.

“The investment will also allow funds provided under this program to be used by issuers to also support lending to small businesses.”

Liquidity facility rejected
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