In a better place
Money Magazine Australia|June 2020
A sector that learnt its lessons the hard way remains focused on preserving investors’ capital and providing a reliable income
DARREN SNYDER
In a better place

The coronavirus and its economic effects sent shockwaves through financial markets in the first quarter of 2020, and the impact on investors will be felt for months if not years.

At the height of volatile sharemarkets in March, and in the weeks that followed, comparisons were drawn (and will continue to be drawn) between the 2007-08 GFC and the global Covid-19 pandemic.

The GFC was started by the collapse of the US housing market. Once this ripple hit Australia, the crisis was more of a tsunami and investors rapidly moved their money out of higher-yielding investment products – mortgage trusts included.

GFC versus Covid-19

Several mortgage trusts survived the GFC and several folded. There were trusts that continued to pay investors monthly or quarterly income (loan repayments from borrowers) but had to limit or suspend redemptions because of significant liquidity issues (i.e., investment units in mortgages couldn’t be sold and converted to cash quickly). Skip to 2020 and you haven’t heard about these same problems during the coronavirus.

Louis Christopher, managing director at SQM Research, says its view going into the pandemic was that the bulk of the more recognised mortgage trusts were well placed.

“They came into this period with fairly conservative lending policies and during this current crisis a number of them have tightened up their lending criteria [including peer-to-peer lenders],” says Christopher. “This is a good move and quite a contrast to the GFC, where mortgage trusts were bashed. Many of the mortgage trusts went into the GFC with a liquidity mismatch where lending standards were looser, and we’re not seeing it this time around.”

Esta historia es de la edición June 2020 de Money Magazine Australia.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

Esta historia es de la edición June 2020 de Money Magazine Australia.

Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.

MÁS HISTORIAS DE MONEY MAGAZINE AUSTRALIAVer todo
An outrageous, beautiful monopoly
Money Magazine Australia

An outrageous, beautiful monopoly

Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.

time-read
4 minutos  |
July 2024
Drop the anchor to judge value
Money Magazine Australia

Drop the anchor to judge value

Buying and selling decisions should be based on where a stock price is going, not where it has been.

time-read
3 minutos  |
July 2024
Powering the AI boom
Money Magazine Australia

Powering the AI boom

Beyond the software and chipmakers, where will the energy come from?

time-read
3 minutos  |
July 2024
Get into life
Money Magazine Australia

Get into life

Tucked inside super are products that can protect you from life's inevitable uncertainties.

time-read
5 minutos  |
July 2024
Paths to home ownership
Money Magazine Australia

Paths to home ownership

Taking the road less travelled can sometimes deliver unexpected benefits.

time-read
5 minutos  |
July 2024
Sold! Quick ways to add value
Money Magazine Australia

Sold! Quick ways to add value

Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.

time-read
5 minutos  |
July 2024
Money lessons the kids need to know
Money Magazine Australia

Money lessons the kids need to know

Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.

time-read
4 minutos  |
July 2024
Property-investing rules: are they likely to change?
Money Magazine Australia

Property-investing rules: are they likely to change?

The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.

time-read
3 minutos  |
July 2024
What's love got to do with it?
Money Magazine Australia

What's love got to do with it?

A rollercoaster of emotions could be driving poor crypto behaviour.

time-read
3 minutos  |
July 2024
Are we ready to be cash-free?
Money Magazine Australia

Are we ready to be cash-free?

Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.

time-read
2 minutos  |
July 2024