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Brokers warned over trail books amid refi boom

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James Mitchell 5 minute read

A leading mortgage provider has urged brokers to look beyond their trail book when building a business in today’s rapidly changing home lending market.

Speaking at the Pepper Money Insights Roadshow in Sydney this week, the group’s managing director of Australian mortgages and personal loans, Mario Rehayem, said broker trail books are no longer seeing the big multiples they once were.

“When we look at the trail book today it is not getting the multiple it deserves or the multiple it was getting previously. You need to really understand what drives that multiple, or the purchaser’s behaviour, when they are assessing your trail book,” Mr Rehayem said. “At the moment, we are in a refinance market. That’s great, as long as borrowers are not refinancing from you.”

According to Mr Rehayem, brokers should consider what a potential buyer of their trail book will be looking at, including the average loan life, the book’s performance in terms of arrears, the demographic split, the geographic diversity, the proportion of investor and interest-only lending, and how diversified the book is across different lenders.


Mr Rehayem said brokers with a back book heavily exposed to one lender could be at risk, particularly if that lender decides to pull away from the broker channel.

Rather than looking at the trail book alone, he believes brokers should be thinking about how they can build a customer-centric lead generation business.

“The number of customers you acquire, or transact with, or help – that is your return on investment,” he said, adding that a broking business needs to be a “going concern” that can clearly show “how many leads are being generated” and converted over time.

Mr Rehayem’s comments come as traditional mortgage broking businesses face stiff competition from digital heavyweights that have built successful businesses around lead generation. Online broker models are becoming increasingly prevalent, while groups such as ASX-listed iSelect – which aggregates under AFG – is fast becoming one of the biggest brokerages in the country by leveraging its digital lead generation capabilities.

“The unfortunate piece for the broking industry is that our business – the broker business – is hinged on a back book. Most brokers will only have a trail book to sell. That’s the wrong way to set up your business,” Mr Rehayem said.


“It’s never too late to take on this piece of advice: do not set your business up just as a trail book to sell.”

[Related: New trail book marketplace launches]

Brokers warned over trail books amid refi boom
mario pepper
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mario pepper
James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.



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