making money, page-3

High Starwars. Dont worry about the pullback in shareprice as this is expected during the SPP phause. It still managed to stay 20% above the SPP options price. The recent interest rate increases all bode well for non-bank lenders such as FFF.

I hope the below article answers some of your questions.


http://www.tradingroom.com.au/apps/view_breaking_news_article.ac?page=/data/news_research/published/2009/12/349/catf_091215_165000_1414.html


"Non-bank lenders to return in 2010 to RMBS market- Deloitte


SYDNEY, Dec 15 AAP
December 15 2009, 4:50PM
Competition in Australia's home loan market is likely to intensify next year as non-bank lenders, who were sidelined during the financial crisis, regain access to securitisation markets.

Issuance of residential mortgage-backed securities (RMBS) will rise in 2010 as issuance spreads narrow and home loan interest rates continue to rise because of the higher cost of funding, a report released by business advisory firm Deloitte on Tuesday said.

Mortgage securitisation is the process whereby lenders bundle up a number of mortgages as an interest bearing financial product and sell it to investors.
It can be an effective way of funding home loans because it matches investors who want long term fixed income with borrowers who repay their loan over many years.

"It (securitisation) will be an attractive source, or necessary source, for all lenders come 2010," Deloitte partner for advisory and assurance Graham Mott said.

"I think we will see more (independent lenders in 2010) and primarily that will be the return of those who have been on the fence for a while."

The fence sitters include non-bank lenders such as Resi Home Loans, Firstfolio and Opportune Home Loans, as well as the regional banks such as Bank of Queensland Ltd and Bendigo and Adelaide Bank Ltd, which have found it difficult to lend competitively because they can't access funding as cheaply as the major banks.

An opportunity has opened now as home loan interest rates have risen, and are likely to continue to rise, not only because of the Reserve Bank of Australia's (RBA) cash interest rate increases, but because the major banks have sought to pass on higher deposit and wholesales funding costs.

That was illustrated as Westpac Banking Corp earlier this month raised its variable home loan rate by 45 basis points after the RBA increased its rate by 25 basis points. ANZ and Commonwealth Bank also raised by more than the RBA's increase.

"The non-banks see it as necessary for margins to increase to allow for that competition to return," Mr Mott said.

"(Westpac's) recent actions do start to make it more viable for non banks to return to the market."

The other factor is that the cost of securitisation is falling, as investors become more willing to buy RMBS products in the debt market after a recent lock out.

James Hickey, Deloitte partner for Actuaries and consultants said the spreads on recent issues had declined to about 120 basis points from 130 basis points over the bank bill swap rate.

He said non-bank lenders had indicated to him that they would consider entering the market when the spread declined to about 100 basis points, something they hoped it would do during 2010.

Ironically, the desire of the major banks to diversify their own funding by issuing RMBS may hasten the spreads to decline, allowing the re-entry of the non-bank competitors.

Commonwealth Bank of Australia Ltd chief executive Ralph Norris told AAP in interview on Tuesday that his bank would consider issuing into the RMBS market.

"If the market's open up and are available to take a reasonable amount of volume at a reasonable price then certainly we would consider using that as an option," he said.

On Monday, Westpac Banking Corporation launched a $1 billion RMBS issue, the bank's first in two years, giving the market one of it biggest deals since the onset of the global financial crisis.

"The market can only react positively to the announcement yesterday by Westpac in relation to their securitisation," Mr Mott said.

"Given the prohibitive cost of deposits, securitisation is now starting to look more attractive."

By David McIntyre"