Residential mortgage loans
Hi James, What are your thoughts on diversifying into residential mortgage loans and the best way to do it? Cheers John
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Answer
Hi John,
We feel the best way to play residential mortgages is through the top quality end of town i.e. Commonwealth Bank (CBA). In 2021 CBA had around 26% of the Australian mortgage market by gross lending, outside of the “Big 4” banks Macquarie Group (MQG) came next with less than 4% but is growing strongly.It might feel boring but considering its strength over the last 6-months and forecast 4.1% fully franked yield I’m ok with boring in this defensive natured market.
Other ideas would be through residential mortgaged backed securities known as RMBS, a manager called Realm is a good place to start there, these guys are solid operators that we know while there are a bunch of mortgage funds available with Blackstone backed La Trobe one of the most well known in the space. Just chose carefully as liquidity is lower than buying a stock on the market.
