More Federal aid for mortgage sector rumoured

The Australian government may be looking into a a third round of financial support for smaller and non-bank lenders in the home loan market.

The Financial Review reported that Treasury was preparing advice on options. These options are likely to include further direct investment in mortgage-backed securities by the Australian Office of Financial Management or federal guarantees over mortgage-backed securities.

The AOFM is near the end of its funding program for mortgage-backed securities. The government initially set this at $4 billion and then doubled it to $8 billion. The AOFM has only around $1 billion left to invest under this program, sufficient to part fund only a handful of additional programs.