Brokers vie for market share

MORTGAGE brokers have taken a battering over the past two years so perhaps it's not surprising that the big franchise groups in this sector have focused on service to retain support.

Falling lending volumes, reduced commissions and more competition from the big banks' direct sales force has crimped the earnings of many mortgage brokers.

The country's biggest mortgage broker, Mortgage Choice, gives a detailed insight into the sector's health via its status as an ASX-listed company.

In the past six months it has reported lower loan approvals, lower profits, a new chief executive and staff cuts.

Despite the tough conditions, or maybe because of them, three mortgage broking groups are among the top 10 franchises in market research agency 10 Thousand Feet's August satisfaction survey.

The franchises - Smartline Personal Mortgage Advisers, Mortgage Choice and ANZ Mobile Lending - were assessed on franchise renewal rates, recommendation by peers, rewards, lifestyle, passion, support and opportunities.

Mortgage Choice senior corporate affairs manager, Kristy Sheppard, said a franchise business model was more conducive to offering personalised service.

"Our franchisees are passionate about what they do and don't just listen to their customers; they understand and learn," she said.

"Our network strives to maintain the high level of success they expect and it is our passion at group and state offices to do all that we can to help them achieve their business goals."

Mortgage Choice is this year ranked sixth in the WA Business News 'Book of Lists' with 57 franchises in the state.

The firm has a national network of 350 franchises.

Under the Mortgage Choice franchise model, head office pays franchisees the same commission rate for the home loans they write, regardless of the rate paid by the lender selected by a new customer.

The Mortgage Gallery is among Australia's top mortgage and finance brokers, ranking 32 in the Book of Lists.

The company was founded in Perth in 1992 and, after rapid growth, evolved into a franchise structure in 2004, now operating 36 offices throughout WA and Victoria.

Under The Mortgage Gallery's model, franchises earn two income streams - payment received from the lender when a loan is initiated, and ongoing income called a trailer commission, which is paid for the life of a loan.

Managing director Ryan Dhue said the firm's brand and structure had helped build a successful franchise.

He said while the mortgage business was potentially a difficult landscape easily influenced by outside economic factors, The Mortgage Gallery model facilitated rapid growth.

"We have identified at least 10 areas in both regional and metropolitan WA which show significant opportunities ... and we are working on building our network of franchisees to help us achieve this," Mr Dhue said.

The Mortgage Gallery Shenton Park franchisee, Fiona Dempsey, told WA Business News the franchise had built a solid reputation with banking institutions, as well as a cooperative internal culture.

"There is excellent direction and leadership in the company and I believe the reason for its success is because they are continuously forward-thinking," Ms Dempsey said.

In the most recent sign of industry consolidation, Nedlands-based Mortgage Force merged with Smartline, with the combined company consisting of 220 franchises and a loan portfolio worth $10 billion.

Smartline state manager Corey Drew said combining the lending groups and their clients would increase market share and economies of scale of the business.

"The growth since 2006 has certainly been towards mortgage brokers rather than banks," he said.

"Some of the stats around are showing that between 40 and 50 per cent of all people are now going to a mortgage broker for new loans."

Neil Pinner and Michael Brennan established Mortgage Force in 1991, while Smartline was founded in 1999.