Home loan funds call for end to bank term deposits and savings accounts

The managers of investment funds linked to home loan and commercial property loan products have urged the government to reconsider their guarantee of all bank term deposits and bank savings accounts.

The Australian reports that since Kevin Rudd announced the deposit guarantee scheme, the amount of money put into mortgage funds has withered considerably, with investors preferring the security of the bank term deposits and savings accounts, where funds are protected up to the first $1 million.

Making the case for scrapping the scheme, Investment and Financial Services Association chairman David Deverall said that it would show the government’s faith in the home loans market.

"It would be a positive step for many sectors of the finance industry," he said.

Mortgage income funds work by pooling investors’ cash together and selling it on to property developers at a higher rate of interest, providing a steady high-interest revenue stream for the investors.

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