As non-bank lenders grapple with a total freeze in the Australian securitisation market, the RBA has bought $320 million in mortgage-backed bonds to provide necessary liquidity for bank and non-bank lenders that needed to on-sell packaged home loans.
But in the current market, afflicted by the credit crisis, no mortgage-backed securities have been sold this year after investor confidence in these products dropped dramatically - packaged home loans worth $45 billion were sold in the first half of last year and in the second half the figure was just $6 billion.
The packaging of home loans into securitised vehicles until now has provided a valuable additional source of home loan financing to bank and non-bank lenders alike.
It moves the loan from an institution's balance sheet, giving it extra liquidity for other loans or allowing it to meet its regulatory capital requirements. The result for home loan borrowers is that more loans have been available, meaning more competition and cheaper home loans.
The Reserve Bank's actions demonstrate support for bank and non-bank lenders who have been unable to on-sell mortgage-backed securities in the market