While other industries across the country are facing dire skills shortages, a glut of labour is looming for the financial services sector as lenders put off staff in response to the rising cost of funding and liquidity issues.

Jennifer Nielsen, Chief Executive Officer of Loan Market Group, which includes X Inc Finance, said the US sub-prime mortgage crisis had effectively shut down the residential mortgage-backed securities (RMBS) market in Australia.

Many specialist lenders had been forced to either scale back their operations and ration credit, or close their doors altogether, she said.

Ms Nielsen said that while the big five banks were using the ongoing liquidity shortage to increase their mortgage market share and claw back margins, many were also putting off staff in an attempt to rein in their cost base.

She said that potentially hundreds of finance executives, unwanted by major lenders and related institutions, were already in the market and many more could follow in the next few months.

“First, we saw lenders increasing rates over the Reserve Bank cash rate and tightening their lending criteria to cope with limited liquidity within the banking system,” Ms Nielsen said. “With mortgage managers, specialist lenders and major lenders all scaling back, we are now facing retrenchments across the board.

Ms Nielsen said it was already difficult to build expertise in the industry and she expressed concern that market conditions would lead to an exodus of talent.

With banks increasingly looking to outsource their home loan business, mortgage brokers would have to take on a more prominent role as an intermediary between the customer and the lender. While this expansion would soak up some excess labour from the market, retrenchments were likely to continue for some time and not everyone would make the transition to broking.

“From our perspective, we are still recruiting around 25-30 people per month to meet growing market demand,” Ms Nielsen said.

“The mortgage industry is populated by very experienced ex-bankers so these retrenchments will certainly help Loan Market and X Inc to achieve our stated goal of being the number one branded mortgage broker by 2010 with brokers attached to all good real estate agencies in Australia.

However, I would not like to see any talent leave the industry.”