How property prices, low arrears have kept funding markets open
A rebounding property market and low mortgage arrears have kept funding markets wide open for Australian lenders, as investors look for more certain and stable returns amid ongoing volatility in equity markets.
Despite one of the most aggressive interest rate tightening cycles on record, Queensland-based non-bank lender Firstmac told investors in its residential mortgage-backed securities – essentially a bundle of mortgages paying the interest earned to holders – that 30-day arrears were a low 0.4 per cent.
The strength of the RMBS market has even prompted major banks to wade back into the segment.
A year ago, the company had predicted it to reach 1.3 per cent by now.
Firstmac chief financial officer James Austin said the resilience of borrowers to these pressures so far had boosted demand for Australian RMBS deals and kept funding markets alive for the non-bank sector.
“The Australian securitisation market is seen as something of a safe haven,” Mr Austin said. “There is concern around equity markets at the moment and where things might go with all the macro events around the world.
“Whereas with RMBS, you can buy AAA notes and get a 5 per cent interest [based on current margins and cash rate settings]. It’s a no-brainer if you are worried about where equity markets will go or even fixed rate assets.”
The Reserve Bank has lifted interest rates 4 percentage points to 4.1 per cent since last May, and is widely tipped to lift rates again next Tuesday to get a handle on inflation.
The strength of the RMBS market has even prompted major banks to wade back into the segment.Commonwealth Bank priced a $2 billion RMBS offer last week, and Macquarie, which has been growing its home loan market share, has also appointed banks
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