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Settlement spike brightens Mortgage Choice result

by Charbel Kadib6 minute read
Mortgage Choice

The broking franchise has reported a sharp slide in its underlying earnings, offset by strong home loan settlement growth.

Mortgage Choice has released its results for the first half of the 2020 financial year (HY20), posting a cash net profit after tax (NPAT) of $5.5 million, down 22 per cent from $7.1 million in the previous corresponding period.

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According to Mortgage Choice, the profit slump reflected investment in the group’s franchise network, which included the restructuring of its remuneration model that “increased the quantum paid to franchisees”.

The group noted that the HY19 result included five months under the new remuneration structure, while the HY20 reflected a full six months of the new structure – causing a $1.1 million decline in after tax revenue.

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Mortgage Choice’s upfront commission revenue fell by 4 per cent, from $32.1 million to $30.9 million, while its trail revenue slipped from $50.2 million to $50.1 million.

As a result, total commission revenue fell by 2 per cent, from $82.2 million to $81 million.

Home loan settlements were also down 4 per cent on HY19; however, this was offset by a 22 per cent increase in home loan settlements over the six months to December 2019, from $4.1 billion to $5 billion – taking its loan book to $54.3 billion.

Mortgage Choice CEO Susan Mitchell attributed the approvement to the rebound in demand for housing credit.

“The interim results reflect a turnaround in the nation’s housing market and are in line with expectations,” she said.

“We have seen a steady increase in the volume of applications and approvals, and despite settlements being down slightly on the previous corresponding period, they were up 22 per cent on the six months to 30 June 2019.”

Franchise, broker network thins

Mortgage Choice also reported a reduction in the size of its franchise network, from 391 as at 1 July 2019 to 366 as at 31 December 2019.

The number of brokers operating under the Mortgage Choice brand also declined, from 562 to 550 over the same period.

Speaking to The Adviser, Ms Mitchell attributed the drop-off in its network to the exit of “low performing” franchisees and loan writers and the consolidation of franchise operations.  

“Weve had a lot of businesses where there were maybe two loan writers that combined and maybe theres only one going forward with a lot of support in admin,” she said.

When asked if Mortgage Choice would ramp up its recruitment efforts over the coming half, Ms Mitchell told The Adviser that the group would focus on the broader growth of its business.  

“The focus is on growing, part of that is recruitment,” she said.

“The focus is also on efficiencies that were introducing with the ongoing and continued IT investment to continue to make it easier for our brokers to deal with more business and to have more business and get more customers.”

Ms Mitchell continued: “The third part of it is that Mortgage Choice has been a broker for almost 30 years, so we do have some businesses that are ready to move on or to retire. 

“We’re very much focusing on recruitment to get new hungry blood into some of those businesses that will help those customers and take those businesses forward. 

“The focus isn’t just on growing the numbers, but it’s also on growing the amount of business that our group can write.”

[Related: Brokers beef up Bendigo’s mortgage book]

Settlement spike brightens Mortgage Choice result
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Charbel Kadib

Charbel Kadib

AUTHOR

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

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