Mortgage Choice interim profits up 20% and optimistic about housing market for first time in years

Australia’s biggest mortgage broking franchise Mortgage Choice has reported a 20% rise in interim profits with CEO Michael Russell saying the group is optimistic about the housing and home loan markets for the first time in a number of years.

“Housing prices looked to have bottomed and are gradually on their way up,” said Michael Russell at the group's results briefing today.

The group reported interim profits for the six months to December of $7.8 million compared with $6.5 million in the previous corresponding period, in line with previous guidance.

The core Mortgage Choice loan book grew 4.7% to $44.4 billion with approvals down slightly (0.4% to $5.09 billion) and settlements up 2.1% to $4.43 billion.

Mortgage Choice added six franchisees over the six month period to stand at 386 franchises, its highest number of franchisees since January 2009.

After a tough five or six years for the group, mortgage brokers and the market overall, Russell said Mortgage Choice was “optimistic for first time in number of years”.

“Early talks about green shoots were premature a few year back, but looking at the dynamics now, there are sustainable green shoots appearing.

“We are quite buoyed by this."

Russell pointed to RP Data-Rismark figures showing capital city dwelling prices, up for month of January up for the last quarter and up year-on-year.

He noted the resilience in the Melbourne market – the weakest market for Mortgage Choice settlements.

While dwelling prices were down year-on-year in Melbourne, he said it was good to see Melbourne dwelling prices up for the month of January.

“Housing prices looked to have bottomed and are gradually on their way up,” said Russell.

He also noted that consumer sentiment – a significant contributor to the housing and mortgage industry – was finally rising, having “suffered from an extremely long lag time” following 175 basis points being taken off cash rate in past 14 months.

Also supporting the housing market, Russell says, is continued population growth, a housing undersupply issue, “which will form a nice base for housing price growth” and low unemployment, which is “comfortably constrained”.

The interim results show that settlements growth was driven by WA franchisees with settlements up 19% to $469 million  and Queensland up 10% to $1.97 billion in settlements.

This helped correct a small 2% slide in settlements in Mortgage Choice’s biggest market, NSW, which makes up 35% of settlements. Settlements in NSW fell from $1.56 billion to $1.53 billion.

Victorian market hardest for Mortgage Choice, significantly down on year on year basis, with a 4% drop in settlements to $979 million.

Mortgage Choice suffered a small drop in its share of mortgage lending, which fell from 4.1% to 4%. Russell attributed to preparations for a new marketing campaign in March.

"We have held back on marketing spend to give the campaign the best opportunity to be successful,” Russell said.

The group will pay an interim dividend of 6 cents per share.