More competition for mortgages needed

Phil Naylor

The Mortgage and Finance Association of Australia (MFAA) will step up its push for the Government to establish a government-backed source of funding for lenders, securing competition in the banking and non-banking sectors.

Phil Naylor, the chief executive of the MFAA, said: “Competition in the market puts downward pressure on rates and helps to ensure that consumers get better variety and choice of home loans.

“We need securitised sources of funding to keep competition alive. The lack of available credit at the moment has the ability to severely impact non-bank lenders in particular, because they don’t take deposits from their customers like the banks do,” he said.

The MFAA will argue its case in a verbal submission to the House of Representatives Standing Committee on Economics.

“We are calling on the Government to give serious consideration to establishing an Australian version of the Canadian Mortgage Bonds program,” Naylor said.

The Canadian mortgage scheme was introduced to allow smaller financial institutions to provide housing finance at comparable rates to larger institutions by providing high quality securities that are backed by a government guarantee.

“The Canadian model improves competition and is an active move by the Government to lower mortgage rates to the consumer. We think this is needed in Australia to ensure competition flourishes,” Naylor said.