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Sunday, 9 September 2018

Steady increase in securitised mortgages

Channel surfing

Across the 2018 financial year the total value of securitised residential mortgages increased by 8.9 per cent to $108.8 billion according to the Australian Bureau of Statistics. 

The ABS reported some disaggregation issues within the various classes of securitised assets, but the trend is clear enough, with the total value of assets up by about 8 per cent over the financial year. 

The recent increase has been driven by securitised residential mortgages as lending standards have been tightened by the mainstream lenders.  


With major lenders having tightened up lending criteria in the residential space some non-banks have picked up mortgage business, and there has clearly been an increase in securitisation lately. 

While there may be less regulatory oversight, non-bank lending may provide an escape valve for some housing investors having difficulty rolling over an interest-only loan - or for some other non-standard borrowers - which could help to minimise the flow of forced sellers.

Little detail is provided in the corresponding liabilities data, although it is noteworthy that the assets are overwhelmingly owned by Australian resident investors, while asset backed securities issued overseas have decreased as a proportion of total liabilities. 

The wrap

Overall the total assets of Aussie securitisers have steadily increased over the 1½ years to June 2018, following a period of half a decade which reflected little change. 

Whether more widespread securitisation of residential mortgage assets increases or decreases risk in the system depends upon your perspective.

The total value of securitised residential mortgages is still tracking only at about half of the levels seen at the June 2007 peak - and as a share of total residential mortgages is markedly lower - but arguably this in itself says little about the quality of the underlying assets.