26/11/2008 - 22:00

Brokers’ outlook bleak

26/11/2008 - 22:00

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AUSTRALIA'S largest mortgage aggregator, Australian Finance Group, has reported strong growth in profits for the 2008 financial year, but the entire industry is struggling in the current economic climate, and the extended outlook is far from clear.

Brokers’ outlook bleak

AUSTRALIA'S largest mortgage aggregator, Australian Finance Group, has reported strong growth in profits for the 2008 financial year, but the entire industry is struggling in the current economic climate, and the extended outlook is far from clear.

AFG's annual report, released this week, reveals the past financial year was a tale in two parts.

There was strong growth during the first half of the year, but a sharp decline in the second half, with tougher trading conditions a consequence of the credit market dislocation driven predominantly by the sub-prime crisis.

AFG managing director Brett McKeon said despite his company's $18 million net profit, up 44 per cent on the previous year, the industry was in a state of shock after being ravaged by the credit crisis.

"The current outlook, broadly speaking, is pretty ugly," Mr McKeon told WA Business News.

"You've got low consumer confidence and that will have an impact on just about every business sector, including ours, in the short to medium term."

In order to counter the current uncertainty, Mr McKeon has implemented a number of measures to help ensure the West Perth-based company remains on track.

"In May we had a restructure with 37 redundancies and we also did things like drop the Richmond [football] sponsorship and a few other things to reduce our overheads," Mr McKeon said.

"That's helping us preserve the status quo."

However, the weak share market means there are no plans to revive the company's deferred listing on the ASX.

"I don't think anyone is looking at listing any business in the immediate window coming up and we're not any different," Mr McKeon said.

"It's been indefinitely shelved until the world is a much healthier place."

He said the home loans market was sending mixed messages.

"It's certainly concerning that there's not as much competition in the mortgage sector as there used to be," Mr McKeon said.

"But it's a mixed message as well, because on the other side you've got the rates probably dropping next week, which will be a little bit of a stimulus. In the last month figures we saw about a 7 or 8 per cent lift in first homebuyers which was great. So that stimulus package, along with lowering rates, has some positive impact."

The credit crunch of the past year prompted the company to suspended new originations for its mortgage securitisation program because there were no longer any buyers for the end product, a trend expected to continue for the next two to three years.

AFG's total mortgages under administration amount to more than $53 billion.

Three of its main competitors, PLAN, Choice Aggregation Services and FAST, are owned by Challenger Financial Services Group.

In September, Challenger moved to full ownership of PLAN, which has $40 billion of mortgages under administration.

The industry's other big player, Mortgage Choice, has a loan book of about $34 billion.

 

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