Mortgage franchise to grow despite loan demand downturn

by Miklos Bolza31 Jan 2017
While tougher lending criteria, weak wages growth and higher interest rates are set to drag down demand for home loans across the country, national franchise Mortgage Choice is still set to grow, albeit at a slower rate than before, analysts have said.
 
According to a new research note by Morningstar, these medium term headwinds will result in an average annual earnings per share (EPS) growth forecast of 3.5% to fiscal year 2021. Solid growth will be maintained as Mortgage Choice expands its broker footprint and broadens its product range.
 
“These initiatives should help the firm stabilise its market share amid intense competition, while the broker market continues to grow as an increasing proportion of home buyers seek out broker services,” the report said.
 
In fact the increased use of brokers is an industry tailwind for Mortgage Choice as it expands its franchise footprint and improves operational productivity.
 
While the report was specifically around Mortgage Choice, the headwinds mentioned above would be similar for other firms in the mortgage broking space, David Ellis, senior equity analyst of banks, insurance, & diversified financials at Morningstar, told Australian Broker.
 
“I’m not saying that Mortgage Choice is going to slow and other brokers like AFG are going to continue growing strongly. I think it’s an industry-wide trend that we’ll see over the next few years with the slowdown in new mortgages approved or written.”
 
When contacted by Australian Broker, John Flavell, CEO of Mortgage Choice, refrained from offering any further comments on the insights of this research note.
 
“We don’t like to comment on analyst reports. They provide analysis on what the industry as a whole is facing and our results will speak for themselves,” he said.
 
Related stories:
 
Home loan approvals surge despite rate hike threat
 
Fixed rate demand surges for four months running
 
APRA concerned about “frogs in pots”: Mortgage Choice

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