'Ferocious' fight for the top

by AB14 May 2014
A market researcher has predicted where major mortgage companies will be at the end of the year and beyond, and said the competition at the top will become “ferocious”.

Over the five years through  2013-14, AFG’s commission revenue has been “extremely volatile”, Ibis World said in a report on the mortgage broking industry.

The company – which has a 20.5% market share – is forecast to earn $303.7 million in  2013-14,  representing a compound annual increase of 4.3%.
“However, during that time, commission income dipped to $176.5 million in 2010-11  as AFG suffered the full brunt of the credit crunch and market downturn,” the report said.
But overall, in the five years through 2013-14, revenue is forecast to have grown at a faster rate than the general industry, representing a marginal increase in market share.
“The company continues to diversify its operations to incorporate property development, giving it a steady stream of properties to sell and finance,” the report said.
Commonwealth Bank of Australia, which has a market share of 13.7%, became a major player in mortgage broking with the acquisition of Aussie Home Loans in early 2013.
Aussie’s revenue is forecast to achieve 8.6% compound annual growth over the five years through  2013-14  to reach $202.9 million.
This is expected to outperform the overall industry, the report said.
Based on the company’s strong results of late, IbisWorld estimates Aussie has increased its market share in the mortgage brokers industry over the period and overtaken the previous  second-largest player, Mortgage Choice.
Mortgage Choice has a market share of 9.3%, but its revenue is forecast by IbisWorld to decline at a compound annual rate of 4.2% over the five years through  2013-14.
“This is expected to underperform the overall industry and result in the company losing market share. This is largely the result of decline of 14.5% in 2009-10,  starting four years of revenue decline,” the report said.
Mortgage Choice stated in its 2012 annual report that decreasing interest rates had spurred demand for refinancing and first home buyer applications, but revenue suffered regardless, largely due to revaluation of the group’s loan book.
Other companies make up 56.5% of the market.
Ibisworld predicts the level of competition faced by the industry will increase over the next five years to become “ferocious” at the top.