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Mortgage Choice reports 6% fall in broker settlements

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Reporter 5 minute read

Loan settlements originated through the broker channel dropped by 6 per cent in the first half of FY18, despite growth in Mortgage Choice’s overall loan book.

While Mortgage Choice’s loan book rose to $54 billion in the first half of HY18, up by 3.2 per cent from $52.4 billion in HY17, broker-originated settlements declined from $6.37 billion in the first half of the 2017 financial year (HY17) to $5.99 billion in HY18.

The number of settlements also fell, dropping to below 18,500 for the first time in four years.

As such, the financial results show that origination commission received by the brokerage dropped, falling by 8.5 per cent from $38.96 million to $35.6 million in HY18. Trail commission received, however, rose by 1.5 per cent to $48.9 million.

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Origination commission paid also fell, dropping by 12 per cent from $28.46 million to $24.84 million in HY18. Trail commission paid increased by 1.6 per cent to $29.88 million.

Mortgage Choice’s net core commission rose by 2 per cent to $29.92 million.

While there has been no reasoning for the drop in broker settlements, the company has suggested that it will seek to improve broker productivity in the future. 

CEO John Flavell noted that Mortgage Choice plans to further diversify and increase broker productivity.

“Looking ahead, we will continue to grow the business through our proactive approach to diversification. We will also focus on extending our brand presence, improving the customer experience and increasing broker productivity,” the CEO said. 

“We [will] continue to increase our brand presence across the country via growth in the number of retail shopfronts and other marketing activities at a local level.” 

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Mortgage Choice has said that it will execute its plans to increase broker productivity through its new broker platform, with the first phase set to launch this month.

Mr Flavell said: “Technology is a critical enabler to increasing broker productivity and assisting franchisees in delivering an excellent customer experience, particularly in an increasingly complex lending environment.

“Our purpose-built online broker platform will significantly reduce data entry and the need for a broker to access multiple systems to write a home loan.”

Overall, however, the brokerage’s net profits grew by 7 per cent from $11.7 million in HY17 to $12.4 million in HY18.

Funds under advice in its financial planning division also rose, increasing by 50 per cent to $634.2 million, while premiums in force also jumped by 21 per cent to $26.6 million.

Mr Flavell attributed the increases to efforts from the broker network to refer clients to the company’s financial advice offering. 

The proportion of gross revenue from broking fell from 90.2 per cent in the first half of FY17 to 88.2 per cent in the first half of FY18.

Non-residential lending activities increased in the first half of this financial year to 11.8 per cent, with financial planning leading the way with 15.3 per cent growth.

The results read: “Continued growth in gross revenue from financial planning and diversified products — up [by] 15.3 per cent and 12.7 per cent, respectively — partially offset the decline in revenue from broking commissions, proving the merit of the company’s diversification strategy. 

“Diversification remains a key opportunity for further revenue growth.”

Reflecting on the company’s overall performance in HY18, Mr Flavell maintained a positive outlook.

The CEO said: “The interim financial results for FY18 are pleasing and I am confident that we can continue to grow and evolve the business as we cater to the broader financial needs of our customers.

“We look forward to continuing to deliver solid results and addressing the market again at financial year’s end.”

[Related: The top 25 brokerages]

Mortgage Choice reports 6% fall in broker settlements
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