Residential Mortgage-Backed Securities (RMBS) in Australia: 2025 Guide

Residential Mortgage-Backed Securities (RMBS) have long been a critical—if often overlooked—pillar of Australia’s housing finance system. In 2025, as the property market evolves and regulatory settings shift, understanding RMBS is more important than ever for homeowners, would-be borrowers, and investors alike. But what exactly are RMBS, how do they work, and what’s changing this year that could affect your mortgage or investment portfolio?

What Are Residential Mortgage-Backed Securities (RMBS)?

At their core, RMBS are financial instruments that bundle together thousands of residential home loans and sell them as tradeable securities to investors. Banks and non-bank lenders use RMBS to free up capital, enabling them to write more home loans. Investors—ranging from superannuation funds to global asset managers—receive regular payments derived from the interest and principal paid by Australian homeowners.

• How it works: Lenders package pools of home loans, transfer them to a special purpose vehicle, and issue securities backed by the loan repayments.
• Who buys RMBS? Institutional investors, such as super funds, insurance companies, and sometimes government agencies.
• Why it matters: The RMBS market provides a vital source of funding for Australian lenders, especially non-bank and regional players, fostering competition and keeping mortgage rates in check.

RMBS Market Trends and 2025 Policy Updates

The RMBS market has bounced back strongly since the COVID-19 pandemic, with issuance volumes in 2024 reaching pre-pandemic highs. The Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA) have both signalled the ongoing importance of RMBS for financial stability and mortgage market diversity. However, 2025 brings several important developments:

• APRA’s 2025 Capital Framework: APRA’s revised capital requirements, effective from January 2025, mean banks and lenders must hold more capital against certain types of mortgage exposures. This could make RMBS even more attractive as a funding tool for non-banks, potentially increasing issuance.
• Green RMBS: There’s a surge in “green” RMBS, where the underlying mortgages are for energy-efficient or sustainable homes. In 2025, several major lenders—including Macquarie and Pepper—have issued green RMBS to tap into ESG (environmental, social, and governance) investor demand.
• Investor Appetite: With cash rates stabilising and inflation cooling, investor appetite for RMBS is strong, particularly for AAA-rated tranches offering yields above government bonds but with low historical default rates.

Example: In March 2025, Firstmac priced a $2.4 billion RMBS deal—the largest in its history—underscoring robust demand. Over 70% was snapped up by local investors, with the remainder placed offshore.

What RMBS Mean for Homeowners and Investors

While RMBS deals are largely invisible to everyday homeowners, they indirectly shape the mortgage market:

• For homeowners and borrowers: RMBS allow lenders, especially non-banks, to offer competitive rates and flexible loan products—even to borrowers with unique circumstances. If you’ve secured a mortgage from a non-bank lender, there’s a good chance your loan is part of an RMBS pool.
• For investors: RMBS offer a way to gain exposure to the Australian housing market without owning physical property. The risk profile varies by tranche, but senior RMBS tranches have historically experienced very low losses—even during economic shocks.
• Risks: While Australia’s RMBS market is well-regulated and has a strong track record, investors should be mindful of potential risks from rising arrears if unemployment ticks up or house prices fall sharply.

Recent APRA and RBA reviews confirm that Australia’s RMBS structures are robust, with high levels of credit enhancement and conservative lending standards underpinning most pools.

How RMBS Are Evolving: Technology and Transparency

The digital transformation of the mortgage industry is starting to reshape RMBS as well. In 2025, several lenders are experimenting with blockchain-based RMBS issuance, aiming to boost transparency and streamline settlement. Meanwhile, enhanced loan-level data reporting—required by both APRA and the Australian Securitisation Forum—gives investors unprecedented insight into the quality of underlying mortgages.

This greater transparency is helping to maintain confidence in the market, especially as new entrants and fintech lenders ramp up their activity.

The Bottom Line: Why RMBS Matter in 2025

Whether you’re a homeowner, a mortgage broker, or an investor, the RMBS market affects you more than you might realise. With regulatory changes, green finance trends, and digital innovation driving the sector in 2025, it’s a space worth watching closely.