Deposit guarantee will hurt property market

The Federal Government's bank deposit guarantee could weaken the property market mortgage finance companies are warning. “This issue has caused concern and uncertainty where it didn't need to,” Perpetual's head of investments, Richard Brandweiner, said. “They were very safe investments.” Mr Brandweiner said that backing deposits affected the ability of non-bank funds to lend money to developers, further depressing property prices. “It is likely to have an impact on the ability of borrowers to refinance and could lead to further weakness in the property market,” he said. Perpetual, said there had been a small increase in redemption requests from the $2 billion Wholesale Monthly Income Fund. Treasurer Wayne Swan reassured investors in the mortgage fund sector yesterday “What I say to them is that their investments are safe, but our decision to provide the guarantee will put further liquidity in the system and make sure that the very central part of our financial system is stable,” Mr Swan said.

Source: The Age