Warning over mortgage funds closure
By
BN
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19/02/2010 12:00:00 AM
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3
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The Light of Day, a group of unlisted property sector investors for responsible banking, has warned that the closure of CBA's funds management arm Colonial First State is likely to be the first in a series of closures, as the government guarantee of bank deposits had forced mortgage funds to freeze.
This would result in there being less money available for the unlisted property trust area, said Owen Lennie spokesperson for Light of Day.
"So when property trusts go to re-finance their projects they will be forced to borrow at higher rates from the Big Four banks, if finance is available at all," he said.
This could result in unlisted property trusts following mortgage funds and deciding to wind up, he added.
"Presenting a major problem for the property industry and those who depend on it for retirement savings and incomes," said Lennie.
Earlier in the year the CBA froze Colonial First State's $900 million mortgage income fund again after it was hit by a rise in bad debt.
Related Story
Colonial re-freezes mortgage fund - The CBA's funds management arm, Colonial First State, has frozen its $900 million mortgage income fund again after it was hit by a rise in bad debt.
Latest Comments
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3
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Pardon me- broker on
19 Feb 2010 02:13 PM
The CBA do not guarantee these Mortgage funds !!!! ,but one would think to keep their credibility intactwith the mum & Dad investor market they would step in and at least guarantee the principal balances , As they took advantadge and used the Federal guarantees , for their own reputation they should "stand behind these mortgage fund ".
They were willing to profit from them in the good times , now they need to stand up and be counted in the not so good times .I doubt if they would even consider the above as an option.
Greg6547 on
26 Feb 2010 02:42 PM
People place their funds in these entities on the promise of higher returns. Higher returns equates to higher risk. If the banks were to guarantee the funds they may as well do the dealing directly and cut out the middle men. I don''t think the funds should be guaranteed. If we take a loss, then so be it - better armed for next time.
Spinner on
26 Feb 2010 08:57 PM
50 cent bet says the advisors sold these funds proporting "its the CBA". Another 50 cent bet says the same advisors have not rang their client now they can''t redeem. Should be 100% clawback on the advisor if they have not. It might be enough clawback to open the fund again then!!