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Brokerage loan book pushes $50bn mark

Mortgage broking firm Mortgage Choice has announced that its loan book rose by 4.4 per cent to $51.7 billion in the financial year ending 2016, the first time the loan book has surpassed the $50 billion milestone. 

According to the company’s annual results for the financial year ended 30 June 2016, the group saw its loan book reach record heights, and also recorded its best ever settlement result, coming in at $12.2 billion, up 6.3 per cent on the previous financial year.

This new high came after the company’s average annual monthly settlements exceeded $1 billion for the first time. 

Mortgage Choice also grew its share of the home loan market in 2016, rising from 3.65 per cent in the first half of the financial year to 3.76 per cent in the second half.

According to the company’s chief executive officer John Flavell, the mortgage business has been boosted by “strong network growth” — with 618 credit representatives in the field for the first time, and franchisee revenue growth up 7 per cent on last year.

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Mr Flavell said: “Part of our ability to grow our share in the market comes down to the number of our franchisees and the number of our loan writers. Whilst an increase in numbers can be pleasing, what you want to see is an overall increase in productive franchises and productive loan writers. And we’ve been seeing that.” 

Notably, the financial results show a continued decline in average loan life, falling from 4 years in March 2015 for existing loans to 3.9 years in March 2016. New settlements also fell marginally, from 4.7 years to 4.6 years respectively. 

Mr Flavell said that the company expected this downward trend to continue as interest rates stay low “for the foreseeable future”, but added that the company was “alert in relation to loan life, but not alarmed”. 

He added: “When you see a continuous cycle of cuts in the cash rate as we have, people don’t necessarily reduce their repayments by a corresponding amount. Accordingly, you see the rate of amortisation accelerate a little. And that’s what has led to this slight decline in relation to expectation of average loan life.” 

As well as strong growth in its home loan offering, the company also reported that gross profit for the financial planning arm grew in the financial year with further potential.

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Mr Flavell said: “Over the last 12 months we have doubled the proportion of our debt customers whose wealth needs we are meeting to 10 per cent. While this is impressive growth, there is still a significant opportunity for us in this space.
 
“Funds Under Advice and Premiums In Force have risen 19 per cent [to $332.1 million] and 28 per cent [to $19.2 million] respectively over the last 12 months. At the same time, gross profit for the financial planning arm has grown 38 per cent. 

“This business is now at the next stage of its maturity and I have no doubt that it will make a positive contribution to the group’s financial results from here on.”

However, he added that while the financial planning business is increasing the proportion of the company’s revenue from sources outside of mortgages, “at [its] core [Mortgage Choice is] still primarily a mortgage business”. 

He added: “Making sure that we maintain our relevance in the market and capitalise the opportunities that the lending market presents has been, and will continue to be, a focus for us …

“Moving into FY17, I believe there is even more we can do to help the business grow and thrive. We will continue our transition into an omni-channel, integrated financial services company. This will deliver value to our customers and franchisees and strong returns to our shareholders.” 

For the financial year 2016, the group generated $20.5 million in cash profit, a 10.7 per cent increase on last year and declared a fully-franked final dividend of 8.5 cents per share. This brought the total dividend for the year to 16.5 cents per share, an increase of one cent on last year.

[Related: Mortgage Choice questioned over share price]

Brokerage loan book pushes $50bn mark
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Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Contact Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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