Bank home loan rate hikes have raised the ire of consumers and the federal government, but Mortgage Choice boss John Flavell believes the company can capitalise on the market volatility.
Mr Flavell said recent surprise moves in mortgage rates by the major lenders were drawing more business to the brokerage.
“Our experience has been that the more volatility and the more change in interest rates, then the more people will engage with brokers,” Mr Flavell told Business Spectator after the company’s AGM on Wednesday.
In the last fortnight the big four lenders have hiked interest rates on their home loans by between 15 and 20 basis points to help meet new capital reserve requirements, stoking criticism from Treasurer Scott Morrison and Prime Minister Malcolm Turnbull in the process.
The jacked up rates, along with the dent to consumer confidence and softer-than-expected official inflation data, have led analysts to forecast a counter cut by the Reserve Bank of Australia.
Mr Flavell said the benefits of using a broker are greater with a more complex and changing market.
“Our enquiries are up, our approvals are up and our settlements are up,” Mr Flavell said. “If there’s no change then people don’t need a whole lot of guidance advice.”
Commonwealth Bank holds a 20 per cent stake in Mortgage Choice, whose loan book hit $50 billion in October. CBA also owns rival John Symond-led Aussie Home Loans, while National Australia Bank owns FAST and Choice Home Loans. Major banks own or have a significant stake in around 40 per cent of Australian brokerages, according to industry figures.
Mr Flavell said his outlook wasn’t dented by the government’s response to the Financial System Inquiry, which backed proposals to make mortgage brokers and financial planners disclose who owns them.
“Regardless of which institution our brokers deal through, they are paid exactly the same," he said. "It means we’re not compromised by ownership.”
Mr Flavell said the inquiry’s recommendation to improve financial advisor training regulation would be good for the industry.
Mortgage Choice reported today that home loan settlements for the first quarter of the financial year are up 8.4 per cent, while financial planning revenue has grown 75.3 per cent. Revenues across the Mortgage Choice group rose 10 per cent to $48.5 million over the three months.
But the brokerage firm notched a second strike against its remuneration report at Wednesday's AGM.
Shareholders voiced their dissent despite Mortgage Choice’s efforts to remove tenure-based share vesting and increase performance hurdles. However, the protesting shareholders declined a resolution to spill the board.
Mr Flavell said the result was disappointing, but defended a bonus paid for former chief executive Michael Russell as part of his total remuneration.
“The quantity of the payment was completely appropriate in our eyes,” Mr Flavell said.
Investors were impressed with the brokerage’s outlook and first quarter figures, with the update stoking a 5 per cent lift in Mortgage Choice shares, despite the stock having fallen around 40 per cent since August last year.
"To say we are disappointed with our share price would be a significant understatement," chairman Peter Ritchie said. "We think the market is making a monumental error."