Mortgage Advice Bureau at the whim of central bankers

Shares in Mortgage Advice Bureau (MAB1) clicked into reverse after the financial services group said that full-year results would come up short of expectations. Naturally, the group is in thrall to wider economic developments, particularly in the property and mortgage markets, so the direction of interest rates is always going to have a major bearing on performance.

The number of financial advisers on its books increased through the period, although average revenue per mainstream adviser decreased by 13 per cent. Management makes the point that the decline is set against an unusually strong comparator in the first six months of 2021, as mortgage completions accelerated due to stamp duty holiday changes. That amounted to a temporary impact and mortgage completions (including product transfers) were on the rise through the period under review. Predictably, with interest rates heading upwards, the proportion of revenue from re-financing increased by six percentage points to 30 per cent.

The near-to medium-term intentions of central bankers are likely to stifle transaction volumes in the housing market, but re-financing activity continues to increase as mortgagees cast around for more favourable arrangements.

Currency traders may have been spooked by the recent mini budget, but there is little doubt that the measures introduced will support the housing and mortgage markets over the long run, although the turmoil in financial markets has forced some mortgage providers to pull their products at short notice. Interest rate uncertainty predominates, but it’s worth noting that the base rate is still well below its long-term average, and we may witness some counter-intuitive outcomes given the composition of the mortgage market in 2022. We retain our neutral rating even as markets remain in flux. Hold.

Last IC View: Hold, 1,280p, 28 Sep 2021