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More to mortgage industry than GE Money

Staff Reporter 3 minute read

The dust has started to settle after the shock announcement that GE Money would no longer distribute its funds via the third-party channel, but how much of a gap will be left?

GE Money cited the impact of rising funding costs as the reason for its market withdrawal.

Signs that all was  not well with GE Money first became clear when it dropped its range of prime products at the beginning of October, followed by its decision to withhold the expected 80bps rate cut from all but customers of Wizard.

Brendan O’Donnell, chief executive of Choice Aggregation Services, said it was “disappointing” to see a well-diversified global business and brand of GE’s calibre close doors and exit the Australian market at such short notice.

“The withdrawal of GE further exacerbates the challenge we will face in terms of competition in the market, creating further opportunity for the big four [banks] in the current market to grow market share,” he said.

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John Bignell, founder of The Mortgage Gallery, also expressed concerns about the diminishing level of competition in the market.

“There’s no doubt GE’s announcement is a blow to the industry – the withdrawal of any lender means less competition, which will invariably be of detriment to the borrower,” he said.

Mr Bignell also highlighted his concern for the future for non-conforming lending.

“We’ve lost one of the most competitive wholesalers, but more importantly, one of the last non-conforming lenders that seemingly had funds to lend.”

For Ken Sayer, managing director of Mortgage House, the news of GE’s withdrawal was disturbing.

“I am shocked that a AAA rated company could [a] withdraw from the market and [b] make out that all was fine when in reality the opposite was true,” he said.

But while there is doubtless dismay at the nature of the lender’s departure the overall mood remains one of optimism.

Murray Cowan, Better Mortgage Management’s managing director, told Mortgage Business that while the loss of any non-bank funder was bad news, conditions for the non-bank sector were looking up.

“It is certainly disappointing news that a major funder has exited the market, however funding for the non-bank sector is improving and there are other wholesalers with competitive delivery rates,” he said.

“The government has made a decisive move to back the non-bank sector with its $8 billion injection, which sends a very clear message that a strong non-bank sector is essential for competition.”

Mr Bignell pointed out that a reduction in funders during a market downturn is unsurprising however when the market picks up new lenders would emerge or others would return.

“We are going through a correction in the funding industry and unfortunately that means that some funders will disappear.

“But at the end of the day, when funding returns to some kind of normality, if there are too few players operating in the third-party market we will see that gap filled by new players – I’m a big believer that the industry will balance itself out in the long-run.”

Published: 28-10-08

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More to mortgage industry than GE Money
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