A unit of Macquarie Group, Australia's largest investment bank, said on Wednesday it will significantly reduce its Australian residential mortgage business because of high funding costs.
Macquarie Bank, which has about 2.5 percent of outstanding housing loans in Australia, said it would continue to support existing mortgage customers, but any new mortgage business would be at much reduced volumes.
Australia's A$916 billion (US$848 billion) home loan market is dominated by banks, while non-bank mortgage lenders have been under severe pressure due to rising cost of wholesale funds, sparked by the global credit crisis.
Non-bank lenders such as RHG, formerly RAMS Home Loans Group, have been battered by investors, while asset manager Allco Finance Group has decided to exit its mortgage business due to tight market conditions.
Macquarie Bank said deteriorating conditions in securitisation markets over the past six months have led to sharp rise in the cost of funding mortgages and reduced availability of funding.
"It will be business as usual for our existing customer base. New mortgage business will continue to be written although it will be at much reduced volumes," Peter Maher, head of Macquarie Bank's banking and financial services group said in a statement.
Macquarie Bank reiterated that the credit quality of its mortgage portfolio was good and it had no sub-prime exposure. The retail and wholesale residential mortgage business represented less than one percent of Macquarie Group's fiscal 2007 profit.
"The impact of the decision to wind-back the business is not financially material," Macquarie Bank said in the statement.