Powered by MOMENTUM MEDIA
subscribe to our newsletter
US players to ‘exploit’ gaps in Aussie mortgage market

US players to ‘exploit’ gaps in Aussie mortgage market

A Deloitte partner has explained why cashed-up foreign companies are beginning to see the benefits of investing in Australia’s $1.6 trillion mortgage market.

Last year saw US giants KKR and Blackstone enter the local home loan market, specifically the non-bank lending space, via the acquisitions of Pepper and La Trobe Financial.

According to Deloitte financial services partner Heather Baister, an expert on mortgage and securitisation markets, Australia’s housing and credit fundamentals are now looking very attractive to global investors.

Advertisement
Advertisement

“We have seen non-banks grow and develop and they have consistently been able to access the RMBS market. They are widely trusted there,” Ms Baister said.

“When you combine that with the international view of the Australian housing market, which is a very resilient market, one that is able to be funded through RMBS and one that still has margins — which you don’t have in a lot of the other global jurisdictions — I think that is really where the opportunity is coming through.”

KKR’s $682 million acquisition of Pepper and Blackstone’s 80 per cent stake in La Trobe Financial are significant — not only are these two of the most established non-bank players in the country, they are also groups that target non-conforming borrowers. It is in this niche where a more detailed knowledge of credit is found and where margins have largely been protected.

“In the prime sector, the margins are tighter,” Ms Baister said. “That is why you are seeing more investment into those non-bank lenders focused on the non-conforming space.”

The strength of Australia’s RMBS market is also worth noting. 2017 was a bumper year in Australia. Securitisation issuance was at its highest since the GFC. Last year saw $36.9 billion of RMBS issuance, of which $14.7 billion came from the non-banks. Over $8 billion of issuance was made up of non-conforming loans.

Meanwhile, increased regulatory scrutiny of the banking sector by APRA has forced the ADIs to tighten credit and even pull out of some markets, such as non-resident lending and property developer finance.

“That has created a real opportunity for non-bank lenders, which is a reason why US players are coming in now,” Ms Baister said.

“They are using their liquidity to exploit gaps in the market, such as foreign income or foreign resident investment into Australia.”

[Analysis: Americans are betting big on Australian mortgages]

US players to ‘exploit’ gaps in Aussie mortgage market
mortgagebusiness

 

Latest News

A multinational non-bank lender has commenced operation in Australia in a bid to disrupt the domestic market as it seeks to service unmet de...

Expected monetary policy adjustments in overseas markets could make it easier for banks to pass on cuts to the cash rate from the RBA, accor...

Michael Andrew, a renowned tax and business leader, has passed away. ...

FROM THE WEB
podcast

LATEST PODCAST: Broker share and Westpac U-turn

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.