1998•The University of QueenslandRequires access
Financial innovation, securitisation and the link between the cash rate and market mortgage rates
Shane. Dickson
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Abstract
This paper explores the recent changes in both the Australian financial system and the home mortgage market. It especially looks at the introduction of securitisation and specialist mortgage lenders into the home mortgage market and the possible effects that this has had on the transmission mechanism relationship between the cash rate and market mortgage rates. The empirical testing finds that there has been no substantial change in the relationship from previous tests over the whole sample period. However, when the period is broken down, it can be said that since the introduction of the new mortgage lenders in 1994, there has been a substantial change in the relationship between the mortgage rates of banks and building societies and the cash rate. The results also show that the mortgage rates of the mortgage managers are closely linked to the cash rate, after allowing for initial start-up biases.