GE Money encourages mortgage customers move to Aussie
GE Money’s mortgage lending business hasn’t been able to pass on the latest interest rate cut but will waive exit fees to encourage customers to refinance with the new part-owner of its Wizard Home Loans unit, John Symond’s Aussie Home Loans.
GE Money Home Lending Australia, which is exiting the mortgage market, said it would waive the deferred administration fee - the exit fee - for 12 months for those home loan borrowers wishing to refinance their home loans though Aussie.
Borrowers with a GE Money variable home loan originated through third parties including mortgage brokers and aggregators, would have the fee waived for three months from March 1, GE Money said in a statement.
GE Money Home Lending Australia says it will not cut interest rates on variable home loans because of its “extraordinarily high cost of funds for home loans”.
The lender cites the continued volatility in wholesale debt markets, as well as its lack of access to the federal government’s wholesale funding guarantee - enjoyed by the big four banks.
The company sources all of its funding from US debt markets, spokesperson Geoff Lynch told AAP.
The move comes after the Reserve Bank of Australia’s full percentage point cut to the official cash rate to 3.25 per cent earlier this month, which the big four banks passed on in full to their home loan customers.
GE Money Australia and New Zealand is a unit of Connecticut-based General Electric’s struggling GE Capital finance division that makes loans to consumers and businesses.
The local business does not take retail deposits.
Its managing director of home lending Lisa Davis said the rising cost of term funding was the main reason the lender decided to exit Australia’s mortgage market last October,
GE Money’s Wizard Home Loans subsidiary was sold to John Symond’s Aussie Home Loans and Commonwealth Bank of Australia Ltd (CBA) on Christmas eve, after seven months of talks with a number of parties.
The deal will be completed on February 27, with Aussie taking GE Money-owned Wizard’s brand and franchise network for an undisclosed amount.
Aussie’s 33 per cent shareholder, CBA, will acquire $2 billion of mortgages originated by Wizard.
CBA may acquire another $2 billion worth of mortgages at a later date.
The 12-month exit fee waiver offered to borrowers refinancing with Aussie was a condition of the sale, GE Money said
Parent company General Electric is leaking cash and lost 56 per cent of its market value in 2008, with earnings dropping at its GE Capital finance unit around the world as credit markets froze and defaults from the US sub-prime housing crisis kicked in.
Last month General Electric posted a 46 per cent drop in December 2008 quarterly earnings, with GE Capital’s profits falling to $US1.03 billion ($A1.61 billion) - less than one third of last year’s total - and provisions for loan losses blowing out by $1 billion greater than originally forecast.
GE Money says it will now focus its efforts on retail finance, credit cards, personal loans and personal insurance.
AAP
We’ve also had a comment from our reader Louis who has posted the news that he got from GE Managing Director Lisa Davis as per below which I have repeated here below:
GE Money Business Update - DAF waiver and interest rates
GE Money Home Lending Australia today announced that from 1 March 2009 it will temporarily waive the Deferred Administration Fee (DAF) for its home loan customers to assist them in moving to another lender. This is in response to its inability to pass on any of the recent cash rate cut due to the high cost of funds on the wholesale money markets.
As you are aware, the DAF is a charge payable when a customer discharges a home loan before a predetermined period has elapsed. The maximum period is five years from settlement of the initial loan. This covers some of the costs borne by the lender when establishing the loan.
Borrowers with a GE Money home loan originated through third parties such as mortgage originators, brokers and aggregators will have a three-month DAF waiver period from 1 March 2009 to 31 May 2009 .
If you have any questions in relation to the information in this update, please email service@ge.com
Regards
Lisa Davis
Managing Director
Guess that leaves us as the highest home loan interest rate payers in Australia.
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Ted February 19, 2009
It is a bit tough from this mob that they are only limiting the waiver of fee to refinance with their preferred refinancier!
If they are getting out of the game they should have the decency to waive the fee for ALL refiances regardless of the proposed lender.