In the times of low yields, the economic growth of a country halts on a large scale. The situation of low yields started in the Netherlands a few years ago and at that time, payment was made to European countries to buy bonds from the market. And during this period of time, pension funds started to get converted into mortgage lending. This step was taken after realizing that it is important to link such funds in mortgages with banks before redistributing it to savers at the time of their retirement.

This trend of non-bank lending which started in the Netherlands had spread in many other countries. And in the Netherlands itself, this new type of mortgage-backed by pension funds earned 20% of the lending activity. Some of the countries are Ireland, Sweden, Australia, and other spheres of the world. Especially in the countries namely, Sweden and Australia, there is a remarkable change in the financial system. Mortgage and Second mortgage in Toronto are in huge demand and this new type of mortgage activity has given access to more opportunities for people to get their home. Since Toronto second mortgages cost high interest so this new financial system will serve the people well. This idea seems small from a business perspective but it carries a huge potential especially due to an increase in the pension funds.

Let’s take an example of the Australian system which saw a rise and fall of securitization funded nonbank lending over the last few decades. In Australia, employers take funds from employees to deposit until the time of superannuation at an interest rate of 9.5%. Nathan Walsh, CEO of the Australian company, Athena Home Loans that there is a total of AUS $2.7tn deposit in the Australian pension system. And half of these assets are held in equities (AUS$1.3 tn). A total of AUS$226bn are deposited in the banking system which is used for different type of lending. Most of the services are now launched online directly to the customers. This has not only reduced the visits of people into the bank branches but also it has become easier for the bank branches to transfer a huge capital over the internet.

In the coming future, there will be a huge demand for pension assets as their size will increase in comparison to deposits. According to Mr. Walsh, the total pension assets is expected to hit AUS$10tn in the span of the next few decades. If we take into account the global picture then there will be a remarkable increase in the pension funds. Currently, there are fewer pension assets in China than Australia which could increase if the country chooses to introduce pension system. Also, this fund can be shifted to safe assets such as mortgages.

Although there are risks associated with this new type of mortgage lending still, Australian regulatory environment has not criticized it as it carries out proper scrutiny of this system. Athens Home Loans also raised AUS$45 from its banking units which signifies that it is not completely delinked from banking. It will be a thing to watch how well this new mortgage lending system will become popular in other corners of the world.