Going direct pays off for Firstmac

John Kavanagh Mortgages

Mortgage specialist Firstmac has delivered a result that may be a pointer to the future of mortgage lending. It has achieved very strong growth in its loan portfolio, with more than half of that growth coming from direct sales to consumers.

A belated release (via ASIC) of its 2017/18 financial report shows that it grew its loan book by 24 per cent to A$10 billion last financial year.

Fifty-eight per cent of this growth came through direct retail channels, with the balance sold through brokers.

Firstmac’s lending policies are conservative, with 92 per cent of loan settlements during the year at an 80 per cent loan-to-valuation ratio or lower. Fewer than 30 per cent of settlements were interest-only.

At June 30, 0.43 per cent of loans were in arrears (30 days or more past due), which is below the average for the big banks.

The impairment expense rose from $495,000 in 2016/17 to $2.5 million last financial year.

Firstmac’s profit grew from $8.6 million in 2016/17 to $9.6 million last financial year.

The company issued $3.2 billion of residential mortgage-backed securities during the year.

An interesting footnote was a disclosure that the average life of a loan is 54 months, based on the estimated average life of the portfolio.

For most mortgage lenders, the direct channel is only a small part of their distribution. It may prove to be a more appealing option as the broking industry faces a post-Hayne upheaval.