Foxtons, which sells mortgages under the Alexander Hall brand, said a combination of lower average loan sizes, weaker volumes of new purchase mortgages and an increase in lower-value product transfers within its refinance business were behind the fall in revenue.
In its full-year results to 31 December, 51 per cent of its financial services revenue came from non-cyclical refinancing activity, while 49 per cent came from purchase mortgages.
Revenue from home sales was also down 14 per cent from £43.2m to £37.2m, due to the higher interest rate environment and its impact on the mortgage market.
However, the estate agent said its sales volumes outperformed the market, which saw a 22 per cent reduction, according to figures from Twentyci.
Sales transaction volumes in London were down 22 per cent compared to 2022.
High tenant demand and a shortage of rental stock led to a rise in Foxtons’ lettings revenue, up 16 per cent from £86.9m to £101.2m – surpassing the £100m mark for the first time.
The estate agent reported a five per cent rise in total revenue to £147.1m and a 34 per cent fall in profit before tax to £7.9m, which it said was primarily down to the integration of Ludlow Thompson and branch network consolidation.
Looking forward, recovery in buyer demand as mortgage rates began to reduce in the opening months of the year has caused a 31 per cent YOY increase in the value of the under-offer sales transactions in the pipeline at the end of February.
The growth in the value of the under-offer pipeline is expected to deliver good YOY revenue growth in the first half of the year, with further growth expected in the second half if mortgage rates continue to stabilise and pent-up demand is released.
In financial services, improved new buyer demand alongside good levels of non-cyclical refinance activity has supported 16 per cent growth in the value of the pipeline.
Guy Gittins, chief executive, said: “2023 was a year in which Foxtons has been fundamentally transformed. We have achieved a lot in a short space of time by making improvements across the business, and Foxtons is now in much better shape than the company I inherited 18 months ago.
“Our strategy to deliver growth through sales market cycles by delivering lettings growth is working, delivering resilient earnings for the year despite a weak sales market and the investment we made in fee earners. We are on track against our medium-term target of delivering £25m to £30m of adjusted operating profit, through organic and acquisitive growth and supported by improving market conditions.”
