Guarantee extension push for mortgage funds

Representatives from the mortgage funds industry will meet with the Government today to discuss extending its guarantee on bank deposits to mortgage funds.

Representatives from the mortgage funds industry will meet with the Government today to discuss extending its guarantee on bank deposits to mortgage funds.

The Investment and Financial Services Association will hold talks with Treasurer Wayne Swan this afternoon to try to convince the Government to guarantee mortgage deposits.

Another mortgage fund, Colonial First State, announced today it would also block investors from withdrawing funds from its accounts.

“The sudden actions of other fund managers have had a roll-on affect on Colonial First State’s mortgage funds, causing an increased level of redemptions in the last few days,” Colonial says.

“This decision will enable Colonial First State to take a measured approach to processing withdrawals in an orderly fashion.”

Colonial joins Perpetual, AXA Asia Pacific, Challenger and Australian Unity in freezing funds, after the Government’s deposit guarantee announcement saw a flood of withdrawals from mortgage funds and into protected accounts.

More than $24 billion in mortgage funds have now been frozen.

But the Government is hesitant to extend the guarantee to mortgage funds, with Treasurer Swan last week saying they are market-based and are more susceptible to change. He says the Government will only consider extending the guarantee under certain circumstances.