Mortgage broker and aggregator Yellow Brick Road has cut the net present value of its trail commissions to reflect “abnormally high” levels of refinancing and loan repayments in the mortgage market. 

YBR said the cut was also due to a change in the business mix, with more loan originations through its Vow wholesale aggregation business, which has higher commission rates for the brokers.

This has been a theme for mortgage brokers during the reporting season. REA Group also cut the valuation of trail commissions in the Mortgage Choice broking business to reflect higher mortgage runoff rates and higher broker payout ratios.

The revaluation of YBR’s trail commissions, which represent 90 per cent of the company’s net assets, was one of the factors that tipped the company into loss for the year to June. It reported a loss of A$2.5 million, compared with a loss of $460,000 in 2020/21.

Mortgage settlements rose 56.2 per cent over the year to $21 billion and the loan book grew 11.9 per cent to $57.9 billion. Vow accounts for the bulk of the loan book, at $49.7 billion.

The Resi Wholesale Funding business, which YBR is counting on to generate higher margins, had $428 million of settlements and a $1.3 billion loan book at June 30.

During the year, the company launched Y Home Loans, a direct-to-consumer digital loan broking service. 

Revenue rose 95.8 per cent to $287.9 million and expenses rose 85.2 per cent to $308.2 million.

Cash EBITDA of $2.5 million was down 59 per cent from the previous year. Net cash from operating activities rose from $874,000 in 2020/21 to $3.9 million in the year to June 

During the current financial year the company will introduce a digital decision engine for Resi loan applications and it is working with a fintech to develop data services for its brokers.