Two days ago, property advertising mogul REA Group Ltd (ASX: REA) announced that it was moving into the mortgage market and acquiring a majority stake in big mortgage broker Smartline.
That will give REA a footprint to grow its Australian business by becoming a 'one stop shop' for both buying/ selling, and financing property transactions.
Today, REA's biggest competitor Domain, which is owned by Fairfax Media Limited (ASX: FXJ), also announced that it was also moving into the space with the establishment of its own mortgage broking service, Domain Loan Finder.
This venture is a partnership (Domain owns 60%) with online mortgage broker Lendi, and will offer borrowers access to a panel of mortgage brokers. REA Group's offering is through a partnership with National Australia Bank Ltd. (ASX: NAB) and Domain took a stab at its larger competitor today, quoted in Fairfax media as stating "It would be disingenuous to partner with a single bank."
It's an open question as to whether either of the large players has a winning proposition as yet. Perhaps there will be no ultimate change to their relative market shares – the market is big enough for more than one player.
However, if I was a shareholder in other mortgage brokers like Australian Finance Group Ltd (ASX: AFG), Yellow Brick Road Holdings Ltd (ASX: YBR), Mortgage Choice Limited (ASX: MOC), and Homeloans Limited (ASX: HOM), I would be getting concerned.
Both advertising platforms will be able to feed a monstrous number of prospective leads (i.e., nearly everyone who buys or sells a house) into their in-house brokers which could prove highly lucrative. Mortgage brokers also operate through personal connections, not just via advertising, so it is possible that Domain and REA will find it harder to disrupt the industry than they expect.
