Two weeks after withdrawing its prime Flexible Options products from the broker channel GE Money has gone from offering the lowest wholesale delivery rate to one of the highest.
Mortgage managers were dismayed to hear via email on Tuesday that GE Money would be unable to match other lenders by passing on the RBA rate reduction despite a 0.80 per cent reduction to Wizard clients' rates.
A GE Money spokesperson insisted that funding for Wizard and those distributed via its third-party wholesale business were "managed separately" and carried "different risk profiles".
Speaking to Mortgage Business this morning Mark Rice, GE Money Third Party Solutions' managing director, said the funder is locked into higher funding costs leaving no scope to match domestic lenders in delivering a rate cut to mortgage managers.
“We fund globally and our treasury sits in the United States. A lot of what has been going on in the States has had a direct impact on the cost of funds that GE can raise,” he said.
Despite the spike in costs Mr Rice insisted that GE Money remains flush with funds.
“We don’t have a liquidity problem at all; GE Money still has its AAA rating. But the volatility in the United States has raised our cost of funds, and has increased uncertainty about the future cost of funds,” he said.
Speaking of the reaction from mortgage managers, Mr Rice said: “We fully understand the emotional responses we have had to our decision, they are completely valid.”
“However this is something that is out of our control.”
Despite the impact of more costly overseas funding, the situation for domestic non-bank lenders has recently improved.
Of the funders that have no volume restrictions, Challenger Financial is now understood to offer the most competitive delivery rate at around 7.53 per cent, followed by Resimac at 7.69 per cent.
GE Money sits at 8.20 per cent.
While these are still nervous times for the domestic non-bank sector, there are signs that conditions may be easing.
“The funding environment on the whole has improved in recent months,” AFM director of sales and marketing Iain Forbes told Mortgage Business.
“We are disappointed with GE Money’s decision but there is now greater competition amongst other funders.”
The RBA $4 billion injection has eased pressure on the non-bank sector, enabling a more level playing field for product pricing.
“AFM’s Alternate Product is priced at 7.72 per cent, which competes with any bank rate,” Mr Forbes said. “We are now once again in a stronger position to compete on price.”
Whether GE Money will be in a position to compete with other funders anytime soon remains to be seen.
Mr Rice said that GE Money intends to remain in the wholesale market “however for the short-term it’s a matter of overcoming our internal financial hurdles”.
“Hopefully this will only be temporary; it is something that we will review consistently.”
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