The Australian securitisation market could remain frozen for up another two years, experts say.

According to The Australian, Greg Medcraft, CEO of the Australian Securitisation Forum, said that the underlying issue on the massive decline in RMBS is due to an extreme lack of liquidity.

Australian residential mortgage backed security issuance, which is now virtually non-existent, totalled less than $6 billion in the second half of 2007, a dramatic decline from $45 billion issued in the first six months.

In a quote from The Australian

“It is actually made even worse in Australia because our market relies very heavily on offshore investors to fund the mortgage-backed market, and now that those leveraged investors have gone out of business they are actually liquidating their portfolios and dumping them in the Australian market, and that overhang is making it even worse,” said Greg

While investor confidence remains low, it is unlikely that a recovery was going to happen.  However, the Government moves to provide a guarantee or provide liquidity are important measures to increase the confidence of investors that if they buy these securities, they will be able to sell then again if needed.

Original Article from The Australian can be read here