A decline in lending figures, lower commission rates and only a slight expansion of the franchise network were the ingredients for a 12.5 per cent fall in earnings for broker franchise operator Mortgage Choice in the year to June.
Mortgage Choice has reported yesterday a net profit of $23.5 million for 2009/10, a drop from $26.8 million in 2008.
Origination commission income dropped by two per cent, from $53.4 million to $52.1 million. Trail commission income fell 16 per cent, when calculated on a statutory basis, or two per cent on a cash basis.
The business operating expenses were down nine per cent, from $30.6 million to $27.9 million.
Mortgage Choice chief executive Michael Russell said the group had a very strong focus on cost control and operating efficiency.
One of the system enhancements by Mortgage Choice this year was an electronic conduit for filing loan applications so it could get a better view on quality and conversion issues. It has used the system to improve the performance of its loan writers and it has also been able to use the data it has gathered to challenge the reports coming back from lenders.
Mortgage Choice has created 18 new franchises during 2009 but that was offset by 14 terminations.
Russell said commission structures had stabilised, with no changes during the year. His expectation is that trail commissions will start to rise.
“Since the GFC the mortgage broking industry has worked with lenders to reduce origination costs, through electronic lodgement and better quality applications. We see trails getting better on long-life loans.”