Analysis done by the Australian Office of Financial Management showed that private investors are returning to the residential mortgage-backed securities (RMBS) market, and risk premiums in Australia are declining, lowering the cost for borrowers.
During the peak of the global crisis, the federal government of Australia twice intervened in the RBMS market. It ordered the office to invest as much as A$8 billion in triple-A rated securities in 2008 and 2009, in a bid to maintain liquidity in the RBMS market.
The analysis also showed that for every Australian dollar of public money invested in the RBMS market this year, about A$4.25 of private money was invested. This is compared with 60c for every dollar of public money invested in late-2009 and 25c for every dollar of public money in late-2008.
In January, an AMP issue was increased to A$1 billion from A$540 million, and the office was called on to purchase only A$36 million of the total amount.
So far, four more issues supported by the office this year had been increased from the initial offer due to the demand. Australian Treasurer Wayne Swan said the analysis indicated that the government’s support gives confidence to private investors to invest more of their money into the RBMS market, which many smaller lenders relied heavily on to make home loans.
He said that the Reserve Bank noted that "the securitisation market has started to recover, with the volume of issuance to private investors picking up and spreads narrowing noticeably".
"Narrower spreads mean cheaper home loan funding for smaller lenders — so of course this is great news," he added.
Home-loan approvals in Australia dropped the most in a decade in January, after the government cut its aid to first-time buyers and the central bank increased its borrowing costs, said the Australian Bureau of Statistics.