The Royal Automobile Club of WA has sold its interstate mortgage broking business, bringing to an end its costly attempt to break into a new industry sector.
The Royal Automobile Club of WA has sold its interstate mortgage broking business, bringing to an end its costly attempt to break into a new industry sector.
The business has been sold to a company with strong Perth connections - Choice Aggregation Services, the sister company of mortgage broker Choice Home Loans.
The sale, which settled yesterday, does not affect RAC's Mortgage Find service in WA, which will continue trading as normal.
RAC expanded into the interstate mortgage broking market in 2003, when it bought two existing firms - Loanmart in Adelaide and Advance Loan Direct in Sydney.
The combined business currently has about 60 mortgage brokers and a $1.3 billion loan book, and generated $11.9 million in commission income last financial year.
However, it proved costly for RAC, which wrote-off $4.3 million in goodwill last financial year.
RAC chief executive Terry Agnew attributed the write-down to tougher market conditions, including slower lending growth on the east coast and margin pressure.
Other industry players have been more critical, suggesting RAC paid too much in the first place and compounded its problem by putting two very different businesses together under the Mortgage Find brand.
Choice managing director Michael Russell was upbeat about the value of the acquired business, which has brokers in Sydney, Adelaide, Melbourne, Brisbane and Tasmania.
"One of the key attractions is that the businesses have been long-standing quality operations," he said.
"There is some quality management we are taking on board."
The RAC deal followed Choice's purchase in July of Fintrack Members Pty Ltd, which had 300 mortgage brokers.
The two acquisitions have confirmed Choice Aggregation Services as one of the big four aggregators in the mortgage broking market, along with Perth-based Australian Finance Group, FAST and Plan Australia.
Mr Russell said his group now has a $14 billion loan book and provides aggregator services - such as compliance, training and software - to more than 1,000 mortgage brokers.
This comprises 423 who are members of Choice Home Loans and another 600 who trade under their own brand.
Choice was established in Perth in the 1980s by Ross Begley and Greg Pennells, who continue as non-executive directors.
The business is now run from Melbourne by Mr Russell, who is also a shareholder.
They were joined in February by private equity investor Quadrant Capital, which invested $20.1 million for an undisclosed shareholding.
