Australian government to fund non-bank lenders

Taxpayer funds will be used to buy $8 billion worth of AAA rated Mortgage Backed Securities from non-bank lenders, in an attempt to maintain competition in the home loan market.

Treasurer, Mr Wayne Swan, announced that the Federal Government would move into the home loan market to help non-bank lenders compete with the major banks.

The need to have a competitive home loan market after the end of the sub-prime crisis outweighs the cost of the investment.

Unlike in foreign countries such as the USA, Australian mortgage backed securities have negligible default rates and a high rate of returns, so the taxpayer is expected to make money from this transaction.

The goal of the investment is to restore confidence in the mortgage market and re-invigorate investment in the financial sector.

The $4 billion that the government originally announced was no-where near enough to cover the requirements of non-bank lenders. However, if confidence is restored by the move then non-banks should be able to securitise new loans and fund further lending activities. After feedback from the finance industry the government increased the amount to $8 billion.

Non-bank lenders such as Aussie Home Loans and Resi Mortgage Corporation strongly endorsed the move made by the Treasurer. Lisa Montgomery of Resi Mortgage Corporation noted that the industry eagerly awaits the details of the plan.

  • Lilynette

    Where can I learn more about those lenders that have been affected by the subprime mortgage crisis?

  • Hi Lilynette,

    You can check out our Risky Loans page to learn about the lenders affected by the credit crisis:
    https://www.homeloanexperts.com.au/home-loan-articles/risky-loans/

    If there’s more you’d like to know or discuss any mortgage related matter, please feel free to call us on 1300 889 743.

  • Jones

    I need some help regarding saving for a home loan deposit. I had saved a bit before but due to a personal financial situation, it’s gone. Would really appreciate some tips on this.

  • Hey Jones,

    There are different ways that you can go about to save a deposit and break out of the rental trap. This includes the small stuff like setting a realistic goal and budgeting to achieve it. You can also look for any government grants such as the FHOG to help you out. Please check out the saving a deposit page for more info:
    https://www.homeloanexperts.com.au/home-loan-articles/saving-a-deposit/

  • Jones

    Thank you!

  • armida

    I was referred to your website through a friend and I’m finding it a great read. Can you help me buy a house and land package? Two lenders have already said no because I was discharged bankrupt 2 years ago. But now I earn well and my mum is also happy to go guarantor.

  • Hi armida,

    It can be more easier to qualify if you can buy an existing property or building instead. Having your mum cash out existing equity to help you purchase is also an option to consider. If your mum has cash on stand by, we may be able to go for a P2C loan too. Please call us on 1300 889 743 to discuss all this in detail with one of our credit specialists.

  • Sullivan

    Hello, can you help me understand a few things about mortgage exposure limits? Best if you can direct me to a page and I’ll research myself. Thanks.

  • Hey Sullivan.
    Yes, we do have a page on mortgage exposure limits so please check it out here:
    https://www.homeloanexperts.com.au/home-loan-articles/mortgage-exposure-limits/

  • Lisa F

    Is it costly to maintain a commercial property? More so than a normal residential property?

  • Hi Lisa,

    Although many of the outgoings on commercial properties including council rates, insurance, repairs and maintenance are paid for by the lessee, it’s still important to consider the age and condition of the building structure before committing to the investment. This is because, yes, it can be quite costly to maintain. Please check out the commercial property risks page to learn in detail on why:
    https://www.homeloanexperts.com.au/commercial-property-loan/commercial-property-risks/