Non Bank Mortgage Lending Expected To Rebound In 2010
Posted on December 20th, 2009
A survey conducted by professional services firm Deloitte suggests that non bank finance companies are expected to capture a greater share of the mortgage lending market next year, after funding constraints that caused them to cede business to the Big Four lenders subsides and global financial markets continue to recover their health.
The survey examined nine mortgage lenders and found that most believe that the securitisation market would re-emerge as a viable source of funding next year. Securitisation markets are the main source of funding for non bank financial institutions.
The cost of securitisation based funding during the financial crisis became prohibitively expensive, however James Hickey, Deloitte’s partner for banking says he believes that this was beginning to improve.
“It is encouraging that it has been coming down in the second half of 2009, and looking at the recent deal flows that have been coming through, we think there is hope that by the second half of 2010 it will be at a more economic level so that non-bank lenders can think about re-entering,” he said.
At the start of the week, Australian banking major Westpac revealed it would launch a $1 billion RMBS issue, marking the first major issue of this kind by a major lender since the market effectively shut in 2007.
“That’s an encouraging sign of confidence that the funding spreads in the RBMS market are coming to a level where the Big Four are saying that it’s now looking like a more viable form of funding relative to the other sources they have,” Mr Hickey said.
According to the survey results, The Big Four lenders are expected to continue their dominance of the mortgage lending market and will hold between an 80 to 90 per cent share of settlements in 2010. However they are expected to cede some of that market share in the coming years.
The market for residential mortgage lending is valued at close to $1.1. trillion in outstanding loans. New borrowings are valued at approximately $25 billion on a monthly basis, its highest level since June 2007.
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Tags: Expected, Mortgage Lending, Non Bank
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