Yellow Brick Road has made some progress with its plan to increase its margins by developing a YBR branded range of mortgages, reporting that in the six months to December the loan book grew to A$227 million.

It has taken a while to get there. In November 2019 YBR formed a joined venture, Resi Wholesale Funding, with asset manager Magnetar Capital to launch a mortgage-backed securitisation program.

Earlier this month, the program secured a facility limit extension, with an increase from $250 million to $450 million.

YBR chief executive Mark Bouris said amendments to the facility policy and parameters will allow the company to broaden its product offerings.

According to the company’s December half-year financial report, headcount has been increased “to build up internal underwriting teams to support the program. Investments are being made in IT systems and infrastructure to improve productivity as volumes grow”.

In the short term at least, higher wage costs and investment spend tipped the company back into loss.

Revenue from continuing operations grew 60.7 per cent to $144.5 million but expenses grew 54 per cent to $153.6 million. The company reported a loss of $377,000. 

Net cash flow from operating activities was $2.3 million, compared with cash outflow of $657,000 in the previous corresponding period.

The value of new settled loans rose 71.2 per cent and the value of the underlying loan book grew 7 per cent to $55.3 billion.

Like a number of other lenders and brokers, YBR experienced “abnormally high” runoff rates, especially among high margin loans. The company said it is working on retention strategies.

It is also working on the launch of its Y Home Loans digital offering, which will allow customers to make digital applications for home loans.