Home loans are likely to become even harder to get because analysts underestimated Australia’s reliance on the now-shaky securitised mortgage market, and business borrowers could be foremost among those feeling the mortgage squeeze.
Around 13% of Australian home loans were security backed – shorthand for mortgages packaged together and sold on the sharemarket – in late 2007, according to the State of Play: the Australian Mortgage Industry report by The Sheet and Infochoice.com.
The market buyers for securitised mortgages have all but disappeared since the US sub-prime crisis triggered a global credit squeeze.
And that, according to The Sheet’s Ian Rogers, means Australia could now be left with a $23 billion dollar gap in mortgage funding.
“There is an enormous supply shock coming through in the home loan market,” Rogers says. “A whole list of lenders who were the most dynamic force in recent years are now doing a lot less lending and some have disappeared.”
It is non-bank lenders that are most involved in securitised mortgages that have felt the pinch, with RAMS and Mobius disappearing and the likes of Bluestone Group, Liberty Financial and Heritage Building Society winding back their lending.
For borrowers, Rogers says, the upshot is that the tighter lending conditions banks have applied in recent months are likely to continue or get even worse.
“Tighter lending conditions are something people will have to get used to,” Rogers says. “No deposit loans will be practically impossible to get. Low deposit and low doc loans will be harder to get and more expensive, and there will be fewer choices of provider.”
And the squeeze could hit business owners the hardest. The higher amount of the average mortgage from non-bank lenders – $300,000 vs $220,000 overall average – suggests they may have been used as de-facto business loans, Rogers says.
“The average size of loans from these non-conforming lenders was well above average and I’m sure they were really business loans or jumbo investment loans people that people were accessing because they were easier to get,” he says.