Benign but in the black: Mortgage Choice CEO Michael Russell's call on mortgage and housing market

Larry SchlesingerDecember 8, 2020

The flat mortgage and housing market conditions are expected to persist into 2013, according to mortgage broker Mortgage Choice, which managed to grow both its market share and franchise numbers in the 2012 financial year but reported a drop in cash profits.

Mortgage Choice reported net profit after tax of $15 million for the year ending June 30, a fall of 5.7% on the 2011 financial year, in line with earlier guidance.

Last year Mortgage Choice revealed 2011 full-year cash profits of $15.9 million, an increase of 7.4% on the $14.8 million achieved in the 2010 financial year.

At a press briefing today, Mortgage Choice CEO Michael Russell described the mortgage and housing market picture as “benign but in the black”, with ABS housing finance figures showing a 2.9% rise in new mortgage commitments for financial year.

"I can't see any reason for this to change materially from last year.

"We have seen a correction in median house price in past couple of years. My view is for a stable outlook going forward over the next year or two.

Russell says Australia is fortunate that it has an "incredible undersupply of housing issue", which "is real".

As a result he can’t see "any fall of the cliff but a fairly flat house price environment".

Russell expects at the most one more rate cut, possibly in November, but says a 25-basis-point cut would not have much impact on the market.

He says tailwinds in the market are being negated by headwinds.

Tailwinds affecting mortgage lending are "steady population growth, a stable interest rates outlook, fierce competition among lenders, low unemployment and an undersupplied housing market".

Headwinds are "out-of-cycle interest rate movements, increased lender funding costs, global economic uneasiness, falling house prices and consumers deleveraging and saving more".

The total value of loans written by Mortgage Choice brokers and aggregator LoanKit grew by 6.4% to $45.1 billion over the 2012 financial year, with its market share increasing from 4.2% to 4.6% of all new home loans written – peaking at 4.9% (almost one in 20 new loans) in March and April.

Mortgage Choice reported a 13% rise in approvals to $9.9 billion as well as a 11% rise in settlements to $8.7 billion.

Mortgage Choice brokers were paid an average upfront commission of 0.6%, with CFO Susan Mitchell pointing out that all of its brokers are paid the same rate so are not financially motivated to send one home loan to one lender over another.

Mortgage Choice reported that its franchise business had shown growth after growth stalling in the previous three years.

Franchise numbers increased by 12 to 380, the highest number since January 2009, while franchise owners increased from to 330 to 338, the highest since July 2008.

Russell says the key messages was that this was a “solid result, reflects our commitment to diversifying our business running in conjunction to our core business”.

“This is a very pleasing result for the second half of the financial year.”

Mortgage Choice declared a fully franked dividend of 7¢ per share for the second half of the year.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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