Canberra : Australia's market for residential mortgage-backed securities is becoming a cheaper source of funding for institutions lending to the housing market, according to Treasurer Wayne Swan.
The ratio of private funding in securitisations supported by the Australian Office of Financial Management (AOFM) has increased to 81 per cent this year from as little as 25 per cent in late 2008, Swan said in a note yesterday.
Australia's regional banks and non-bank lenders rely more on securitisation as a funding source than the nation's four biggest institutions. In January, the government announced a A$3.4 billion (Dh11.38 billion) investment in mortgage-backed securities sold by five lenders, to encourage participation and narrow the interest-rate spread.
"This government's support is giving private investors the confidence to invest increasing amounts of their own money in the market, which many smaller lenders rely on heavily to make home loans," Swan said yesterday. "Narrower spreads mean cheaper home-loan funding."
The AOFM has supported five transactions in 2010, it said in a report released yesterday by Swan. The bonds were sold at spreads of between 130 and 135 basis points over the benchmark rate, it said. A basis point is 0.01 percentage point.
Private participation in this year's deals at 81 per cent means A$4.25 of private money has been invested for every A$1 of public money, the AOFM said.
