The recent success of the local RMBS market will not last forever and is vulnerable to the whims of one or two large bids, according to AFG.
Speaking to Mortgage Business, AFG Home Loans general manager Cameron Smith said that while the recent transactions from issuers like AFG and the banks look good, they are always dependent on a couple of large bids into the deal to make it successful.
“If those bids don’t come into the deal, then the transaction won’t happen,” Mr Smith said.
“Always remember that the fixed income investor market in Australia is very small and while we do seem to be enjoying a relatively good patch over the last six months with margins contracting, if some of those key accounts disappear or APRA and the Basel III rules change against, then we could quite possibly see those big bids - which come from the bank balance sheets, to be frank – really alter the way the market works,” he said.
“It’s good for the time being, but you wouldn’t bet the farm on the market forever.”
AFG yesterday announced its first RMBS transaction for 2014.
The $300 million pool of home loans was originated through the AFG broker network
“These loans have all been sourced through AFG brokers who originate this product through our aggregation panel lenders,” Mr Smith said.
“Without the brokers supporting anyone on the panel then that lender wouldn’t get any business, so we are happy that our brokers are seeing good reason to recommend AFG home loans to their borrower clients,” he said.
Mr Smith confirmed that AFG will be looking at another RMBS transaction late this year and possibly early again in 2015.