Mortgage broker franchise Smartline mergers with Mortgage Force

Just days after being named as the franchise with the most satisfied franchisees, mortgage broker Smartline Personal Mortgage Advisers has merged with West Australian-based broker Mortgage Force.

The deal, which involved a straight equity swap, has now taking the total number of franchisees under the brands from 140 to 220.

The Smartline brand will operate on the east coast, while the Mortgage Force will be the main brand in Western Australia, where it has a stronger presence than Smartline.

“The merger has given us a more balanced footprint across Australia,” Smartline’s executive director Joe Sirianni says. “Now we’ve got a reasonable spread right across Australia, which is important from a distribution point of view.”

He says the merger was driven by a need to get scale in a mortgage market where the credit crunch has tilted market power towards the four major banks.

About 12 months ago, most big lenders started cutting broker commissions by about 25%, putting pressure on smaller brokers to get big or get out. This merger will increase the size of Smartline’s loan book from around $2 billion to about $3 billion.

“There’s no doubt scale is important,” Sirianni says. “Scale and leverage is important in terms of getting more out of your systems investment.”

He says the market is at an interesting point. While the cuts to broker commissions and the dominance of the major lenders have changed the competitive landscape, the underlying strength of the first home buyer’s section of the market means brokers are still going reasonably well.

“Mortgage brokers are doing okay, the market is not dreadful. From our perspective there is still plenty of opportunity to grow.”

While there are fears that the property sector could cool as the first home buyers grant is phased out, Sirianni says he is comforted by the fact demand in Australia still remains much stronger than supply.

“Prices in real estate should hold rather than fall. It’s a good time to buy investment properties. If you buy well, you can be almost cashflow positive from day one, which is a once-in-a-lifetime opportunity.”

Earlier this week, Smartline was recognised as having Australia’s most satisfied franchisees in a survey my marketing firm 10 Thousand Feet.

Sirianni was delighted with the recognition.

“If you haven’t got happy franchisees and profitable franchises and your business model isn’t sustainable. At the end of the day, if they are successful, we are successful.”