Mortgage Choice to offer home-brand home loans

Mortgage brokerage firm Mortgage Choice will launch its own home loan products within days, in a move chief executive Michael Russel says is as much a defensive one as it is an attack on its competitors.

But despite a move by some lenders to increase LVRs and reduce savings requirements, such as Westpac and Yellow Brick Road, Russel says the products won’t be geared specifically towards first home owners.

An announcement is expected to be made within three or four days, when Russel says the franchise will reveal more details about the products and pricing. He says the move is an attempt to “insulate” the company from damage caused by longer financing approvals caused by bigger lenders, with higher margins another added benefit.

“Most of our competitors have been offering these same types of products, and it’s really an attempt to insulate us. From about 18 months ago, we were very exposed to long turnaround times of up to three weeks. That indirectly caused us some brand damage.”

“We need to take control of our own business, and as such this is really a defensive strategy as much as it is an offensive one. We think we’re offering something very competitive here.”

The move also comes shortly after Mortgage Choice announced its financial results last month, recording a 12.5% fall in net profit after tax to $26.8 million. Actual cash profit gained 14% to $14.8 million.

Franchisees won’t be paid any more for selling the in-house products than any other loans, although the company hopes to dedicate about 10% of its business to the products eventually.

“They won’t get a direct benefit from lending, they’ll still be paid the commission irrespective of which funder they select,” Russel says.

The products will be launched under a separate brand than the Mortgage Choice name, with Russel saying they will be priced competitively to counteract what he says is the continued difficulty of credit availability for home owners.

“We’re going to put these products under a different brand, because we want them to stand on their own two feet. We are going to price them reasonably, and we think they are going to perform very well.”

And although Russel notes there seems to be a shift towards first home buyers once again, with Westpac raising its LVRs and BankWest introducing a first home owner-focussed loan, the new Mortgage Choice products won’t discriminate between new and existing buyers.

“Certainly we think they’ll be very suitable for first home buyers, but we haven’t designed the loans for a specific target group. We think they’ll be suitable for first home buyers, upgraders and so on.”

Last month Russel warned in the company’s annual results there is still a chronic undersupply of housing, which continues to drive up prices and push first home buyers out of the market. He holds to that opinion, saying demand will continue to outstrip supply in spring.

“There is no doubt about it – demand will continue to outstrip supply, and that is why prices are continuing to rise. The timing of these moves for LVRs is exciting as we come into spring, we think that demand will still remain high.”