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The dust is now starting to settle after GE Money’s shock announcement that it will no longer be distributing funds via the third-party channel.
GE Money pointed to rising funding costs as behind its decision.
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Signs that all was not well first became clear when it dropped its range of prime products at the beginning of October. This was followed by a decision to pass on the benefits of the expected 80bps rate cut to Wizard customers only.
Brendan O’Donnell, chief executive of Choice Aggregation Services, said it was “disappointing” to see a brand of GE’s calibre close its 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.
John Bignell, founder of The Mortgage Gallery, also expressed concerns over what GE Money’s decision signalled for competition in the market.
“There’s no doubt GE’s announcement is a blow to the industry,” he said. “The withdrawal of any lender means less competition, which will invariably be of detriment to the borrower.
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.”
Ken Sayer, managing director of Mortgage House, described the news of GE’s withdrawal as disturbing.
“I am shocked that a AAA rated company could withdraw from the market and make out that all was fine when in reality the opposite was true,” he said.
But while there is widespread dismay at the lender’s departure, the overall industry 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 said when the market picked 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,” he said.
“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.”
