Fast refinancing the GE goal

The decision within GE Capital to withhold the 100 basis point cut in interest rates appears to be a late one.

Twenty-five basis points was the talking point in management a week or two ago; a pricing proposal that awakened nerves over the implications for the pricing stance of any breach of the consumer credit code, questions of fairness, and an obligation that fees (and rates) charged in financial services reflect costs.

In any event management opted for an even more confrontational approach.

GE must really want to clear its Australian balance sheet of mortgages fast and is prepared to forego the profits on home lending otherwise protected, to some extent, by break fees.

The GE balance sheet carries about $16 billion in home loans at the moment, a decline of about one sixth in the book over the course of a year.

Wizard customers have not refinanced in any volume in recent months, a function of a smaller pool of lenders and the deterrent of GE's break fee.

GE's exit fees on home loans are among the highest of any lender and may exceed $2000, depending on the loan, according to InfoChoice data.

The home loan businesses GE is exiting from include not just Wizard (after less than five years of ownership) but also AFIG (a wholesale funder germinated within AMP 20 years ago) and even GE's own brand on home loans. This latter offer used to be the ultimate product sale in GE's own network of money shops, strategically located in low income localities.

GE will restrict its consumer business in Australia to retail finance, credit cards, personal loans and personal insurance.