Historical trail-book run-off should be measured loan by loan, not inferred from the change in total monthly commission. A buyer should separately track how many loans remain, how their eligible balances change and how much trail cash is received, while removing new settlements, acquired loans, transfers and correcting entries from the comparison.

The useful result is not one universal attrition percentage. It is a set of cohort curves explaining when loans leave, why income changes and whether the seller’s forecast fits the book’s history.

What run-off means in a trail book

ASIC’s mortgage broker remuneration review found that surveyed lenders paid trail monthly as an annual percentage of the ongoing loan amount while the loan continued, and that payment ceased after repayment (ASIC REP 516). The report describes arrangements observed at the time of its 2017 review, so a buyer must still verify every current lender and aggregator term.

That structure creates three different measures:

  • Account run-off: the percentage of opening loans that cease to be active during a period.
  • Balance run-off: the decline in the eligible opening loan balance, including principal amortisation, extra repayments and discharged balances, subject to each commission formula.
  • Income run-off: the decline in trail actually paid on the same opening pool after rate changes, suspensions, corrections, splits and aggregator deductions.

These measures will not normally match. A book can retain nearly every borrower but produce less trail as balances amortise. Conversely, income may fall because a payment is suspended or adjusted even though the loan has not discharged. Treating every receipt decline as client attrition can misstate both retention and forecast cash.

Build a clean opening-book history

Ask for at least 36 monthly periods and preferably 60 where records allow. The file should preserve a stable, anonymised loan identifier and show settlement date, lender, product, original amount, opening and closing eligible balance, balance reductions, trail rate, gross trail, deductions, net receipt, status and status-change date. Request discharge, refinance, arrears, suspension and correction codes.

Reconcile those fields to the monthly aggregator statements and bank receipts. Then freeze each measurement cohort: loans active at the first day of a month or quarter. Do not add later settlements to that opening pool. New lending is a separate inflow and can conceal deterioration in the existing book.

A monthly bridge should explain:

  1. opening active loans and eligible balance;
  2. scheduled amortisation and verified extra reductions;
  3. full repayments, external refinances and other discharges;
  4. suspensions, reinstatements and commission-only adjustments;
  5. new settlements or transfers, shown separately; and
  6. closing loans, balance and gross and net trail.

The bridge should reproduce the closing data. Unexplained residuals are due-diligence findings, not a rounding convention.

Compare cohorts, not blended averages

Group the frozen loans by settlement vintage, months since settlement, lender, loan purpose, product type, fixed-rate expiry period, balance band and any servicing segment that can be supported without exposing personal information. For each cohort, calculate the share of opening loans and opening eligible balance remaining after 3, 6, 12, 24 and 36 months.

Also calculate a period attrition rate: loans discharged during the period divided by active loans at its start, with a balance-weighted version beside it. A few large discharges can have little effect on account retention but a material effect on trail cash. Show medians and ranges across comparable vintages.

Seasoning matters. Recently settled loans, older amortising loans and cohorts approaching fixed-rate expiry may behave differently. Compare like with like before concluding that run-off is accelerating. The separate loan vintage and seasoning analysis should inform this segmentation, rather than being buried inside a whole-book average.

Separate true exits from other movements

Use the evidence to assign each decline to a reason. A full discharge to another lender is genuine loss of that loan from the book. A customer who obtains a better rate from the same lender may remain. Scheduled principal reduction lowers the commission base without necessarily ending the relationship. Arrears can create a payment gap rather than a permanent exit: ASIC’s 2017 review observed that some lender agreements allowed trail to be suspended in specified circumstances, including arrears.

External conditions can help challenge explanations, but they are not a substitute for this book’s data. The ABS publishes external and internal refinancing series (ABS). The RBA reported in February 2026 that external refinancing had risen to a record share of housing credit amid greater borrower attention and lender competition (RBA). Those series provide context, not a benchmark that can simply be copied into a purchase model.

Test explanations against discharge reports, lender status, customer records and later statements. If reason codes are missing, classify the event as unknown.

Turn history into an acquisition assumption

Ground the base case in comparable seasoned cohorts, then stress it rather than projecting the latest month indefinitely. Downside cases may include more large-balance exits, fixed-rate expiries, lender repricing, reduced contactability and commission suspension. Keep future new lending outside the acquired-book schedule unless the purchase includes the capability and cost required to produce it.

Hypothetical example: an opening cohort of 1,000 loans falls to 920 after 12 months, so account retention is 92%. Eligible balance falls from $400 million to $356 million, or 89% retained, because several larger loans discharge and retained loans amortise. Net trail falls to 86% of its opening run rate after commission adjustments and deductions. Calling all three outcomes an “8% run-off” would obscure the cash exposure the buyer is actually underwriting.

Valuation and accounting advisers should test the effect on forecast cash, discount rates, working capital and price mechanisms. A lawyer should ensure representations, adjustments and deferred consideration use definitions reproducible from the agreed data.

Retention assumptions have a compliance boundary

A forecast may assume timely service and contact, but it should not assume clients will be kept in unsuitable loans to preserve trail. ASIC’s best-interests guidance says refinancing assistance is credit assistance, notes that refinancing costs can exceed savings, and expects records showing the inquiries, investigation and assessment behind recommendations (ASIC RG 273).

Ask who will hold the required authorisations, who may contact clients, what records transfer lawfully, and how the buyer will evidence consumer-focused decisions. Historical retention produced by weak service or conflicted conduct is not a quality indicator.

Questions buyers should resolve

  • Can every monthly decline be classified as amortisation, discharge, suspension, correction or another evidenced movement?
  • Do loan-count, eligible-balance and gross and net trail curves tell the same story?
  • Which cohorts and lenders drive the largest losses, and are results distorted by a few large loans?
  • Are new settlements masking the run-off of the acquired opening book?
  • How sensitive is forecast cash to a faster 12- or 24-month survival decline?
  • Does the sale agreement define attrition and any price adjustment using data both parties can reproduce?

Frequently asked questions

Is there a standard trail-book run-off rate?

No single rate is reliable for every book. Loan age, lender mix, balances, products, borrower behaviour, market conditions and commission terms differ. Use external data as context and derive the acquisition assumption from reconciled loan-level history.

Should run-off be measured by loan count or balance?

Use both, alongside gross and net trail. Count shows relationship survival; balance is closer to the commission base; cash shows what was actually paid. Their divergence often reveals the most useful questions.

Can new lending offset historical attrition?

It can offset the total book decline, but it should be presented separately. Otherwise, the buyer may pay for apparent stability that depends on future origination effort, staff and compliance capability not included in the acquired asset.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.