More needs to be done to revive long-term confidence and competition in Australia’s non-bank mortgage market despite the Federal Government’s rescue package, according to Loan Market Group.
The Federal Government announced on Friday that it would enter the home loan market by investing $4 billion in residential mortgage-backed securities.
Jennifer Nielsen, Chief Executive of Loan Market Group, which includes X Inc Finance, said the move was a good first step in bolstering competition in the home loan market.
“But it shouldn’t end here,” Ms Nielsen said. “A more formalised, long-term solution is vital to protect households and the broader Australian financial system from further severe shocks.”
Ms Nielsen said the creation of a permanent Government-sponsored but independent mortgage body was a “sensible step”.
She said that while not a direct participant in the debate, mortgage brokers had a vested interest to ensure that all Australians had fair access to decent mortgages and rates. She called on the industry to support the creation of a Federal Government-backed securities market.
“By putting in place a long-term mechanism for regulating and controlling the supply of funds domestically, the Federal Government has a unique opportunity to ensure that households and the broader financial system are protected from current and future credit crises,” she said.
Ms Nielsen said the current lack of liquidity was undoing the significant advances made in the past decade in lender competition and innovation, particularly in the way home loans are offered and managed
“If the current situation continues, thousands of Australians who would ordinarily be capable of servicing a mortgage would be unable to secure a home loan,” she said.
A number of mortgage managers and specialist lenders had exited the market, meaning entire consumer groups such as mature people (reverse mortgages and non-conforming) and small businesses (low-doc loans and non conforming loans) had lost the opportunity to borrow funds.