Australia's struggling non-bank lenders should diversify into mortgages, according to the Federal Treasury. The Government is looking at ways to support the non-bank lending sector, concerned that fewer lenders equates to less competition and higher costs for borrowers. Some non-bank lenders have recently withdrawn some products and closed their books to new business.
The Federal Treasury suggests that non-bank lenders need to to diversify their investment portfolio.
Federal Treasury executive director, markets group, Jim Murphy said that while the big banks had picked up market share in the past six months, credit unions and international banks had as well.
"But I would suggest that that's still nowhere near good enough in terms of what the government would like in a competitive mortgage market," he told a federal parliamentary committee hearing in Sydney.
The global credit crunch has tightened mortgage-backed asset markets, also known as securitisation markets, which many non-bank lenders rely on to fund their loan books. Reserve Bank deputy governor Ric Battellino attended the hearing, saying that the central bank had found no evidence that the Australian financial sector was uncompetitive.
Mr Battellino said the current stresses in banking and financial sectors were not permanent and non-bank lenders would re-gain strength in the market at some stage.
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