Asteron pulls the plug

Asteron Life has pulled out of the New Zealand mortgage market following the decision by funder GE to withdraw fixed rate loans, as turmoil in the credit industry continues to take its toll on smaller lenders.

Wednesday, October 1st 2008, 1:41PM

by Maria Scott

Antony Vriens, Asteron's general manager said: “Asteron's home loans were provided by GE Money, who recently made the decision to temporarily withdraw fixed rates due to the uncertainty in the US market – in short, this made it difficult to accurately price fixed rates.”

The company is to focus on its core areas of risk and investments.

Vriens said: "We are closing a small niche business line in order to focus on our highly successful core businesses".

Asteron will continue to administer existing loans. Vriens said that brokers who were receiving trail commission on mortgages would continue to receive payments.

The company’s move is a further indication of the difficulties faced by smaller lenders as a result of international credit turmoil.

Asteron was a among a number of non-bank lenders who had already reduced its range of fixed rate loans following a decision by GE and its funding affiliate AMS to stop funding loans for terms of more than a year. The funder also warned that rates might have to rise but it has since decided to suspend all fixed rate lending.

John Grant, GE Money Director of New Zealand Business, said: "As you can see from the current market activity these are very unusual times. We have decided to take a cautious approach to our funding and have therefore pulled back from all fixed rate lending till we see some clarity from the marketplace.

"This is we believe the most prudent step we can take. We will continue to monitor this on a regular basis.

"We are still offering Variable rate funding for our loans."

Meanwhile, Pioneer Mortgage Services, traditionally one of the more popular non-bank lenders in the New Zealand market, and which also obtained funding from GE, has confirmed that it has dramatically reduced its operation in New Zealand.

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