What’s the state of play for the mortgage broking sector right now, and what will it look like in five years time?
If you’re considering investing in the sector, these are just the questions you’ll want to know.
Mortgage broking a $2.3bn industry
It’s hard to predict how a sector will fare post-Covid-19. However the IbisWorld industry report on mortgage broking in September 2019 largely stands true today, says analyst and author Yin Huey Yeoh, despite the onset of the pandemic.
Back in 2019 expectations for 2020 to 2025 were for a 2.4 per cent revenue increase over the five year period. That is a nice improvement on the far leaner growth trajectory in the five years up to 2020 which saw just a 0.4 per cent revenue rise, though that still equated to a respectable $2.3bn.
However the profit margins were expected to decline significantly with a 22 per cent drop this year.
Looking ahead, the sector is set to become more competitive with about 3 per cent more businesses joining over the next five years.
Market drivers
So what are the pros and cons of entering this market?
According to IbisWorld, there are plenty of strengths and opportunities: a broad customer base is a safer bet than reliance on a few major customers; there are low capital requirements with high revenue growth; high performance drivers; and residential loan rates.
Counter these with few barriers to entry leading to a highly competitive field; low revenue per employee; and low profit levels. The good news is that the very low revenue growth up to this year will ease. Household disposable income also plays a key role in the success of this market, as does a competitive loan rate.
“Current forecasts are likely to remain given the industry is largely serviced-based with no major supply chain disruptions,” IbisWorld suggests in an update on the report.
The Commonwealth Bank-owned Aussie franchise chain counts for 12.8 per cent of the market; the ASX-listed Mortgage Choice takes 7.9 per cent; Smartline Personal Mortgage Advisors is listed by IbisWorld as another player but without any evaluation of market share.