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Mortgage industry braced for increased funding costs

Staff Reporter 2 minute read

Mortgage businesses expect the cost of funds to rise over 2008, according to last week's Mortgage Business straw poll.

A conclusive 73 per cent of respondents expect the cost of funding to worsen, while 17 per cent believe it will remain the same.

Only seven per cent of straw poll respondents expect an improvement.

Professor of Finance at the UNSW’s Australian School of Business and editor of the Journal of Banking Finance Fariborz Moshirian believes the industry’s expectations are realistic in the current conditions.

“Despite a high demand for credit in Australia, our lenders are still linked to the global capital markets and we can probably expect to see the cost of funding increase,” he said.

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But Mr Moshirian expects the prospects for Australian RMBS to improve in the coming months.

“Provided the US can hold off a recession, and China and India continue to do well, we can expect the global economy to perform,” said Mr Moshirian, explaining that a strong global economy will see the demand for credit to remain high internationally.

The global economy is expected to grow at a rate of 4.2 per cent this year – a drop from last year’s 4.9 per cent, but still a very promising forecast according to Mr Moshirian.

“We have to look at both domestic and international factors – but Australian RMBS should eventually attract more investors,” said Mr Moshirian.

Published: 25-02-08

Mortgage industry braced for increased funding costs
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