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Mortgages harder to get over the line

Strung out bank mortgage application processing times are frustrating advisers.

Tuesday, November 19th 2024, 9:13AM 1 Comment

Advisers taking part in economist Tony Alexander’s latest survey say most lenders are at a minimum of 10 working days in their turnaround times – a deeply frustrating situation that is offsetting some easing of lending criteria.

Alongside this, the number of advisers saying banks have become more willing to lend to home buyers has fallen to 17%, down from 34% last month and 57% in September.

The main cause they believe is the blowout in loan application processing times.

When buyers are finding a house, more often than not they are having to put down 15 working days for finance and even then it is tough to get the deal over the line, one adviser says.

“Banks’ appetites are good but they are treating the adviser channel poorly. “They don't seem to understand that their delays in processing applications actually make the problems worse as we're forced to multi-bank applications as we can't wait two weeks for a response.

“Because of the turnaround times and extent of assessment it appears clients are better going direct, which is frustrating and anti-competitive,” another adviser says.

As part of the blowout, banks are tightening up on receiving applications from first home buyers (FBHs) who don’t have a 20% deposit and preference is being given to existing customers.

Banks generally only want live deals – auctions and signed sale and purchase agreements. Even then they are not guaranteed to be accepted, advisers say. 

Some of the slow turnaround times have been put down to bank test rates reducing.

Last week ASB closed all pre-approvals to new customers until 22 November saying it needed to reduce turnaround times as it was experiencing high demand for its home loans because of lower mortgage rates, subdued house prices, growing interest from FBHs, investors and customers looking to refinance.

This did not impress advisers and feedback in Alexander’s survey found one bank giving a 24-hour turnaround to customers who approach the bank directly.

One adviser says he knows of instances where a client got a home loan approved and the contract confirmed before his business even got a response from bank.

The business presented a loan application to one bank, and without a response within a week, the clients went direct to their own bank. They got a full approval within days and the loan was settled within a couple of weeks.

Three quotes

Some advisers blame the slow turnaround times on the Commerce Commission recommending they get three quotes for clients.

In its final September report into banking sector competition, the commission said mortgage advisers needed to "become champions of price competition" and where possible they should present clients with at least three actual offers from lenders.

It said they should also highlight to clients any banks they were not able to work with, as well as the interest rates that might be available there.

At the time, advisers said any suggestion they present borrowers with three bank offers could end up making things harder, as at any given time they know where pricing is sitting across the market, and this informs their recommendations to clients in terms of which lender to submit an application to.

Advisers say they talking to different lenders on an almost daily basis as part of settling deals and constantly reviewing different bank credit policies to help them understand who is prepared to land and at what rates. 

Presenting three different quotes to clients would mean the number of applications to each bank would skyrocket, with lenders having to go through a full credit assessment for loans they are going to get only 33% of the time.
With times ballooning out and already frustrating advisers, if it is happening it is bogging down the entire system to achieve nothing, advisers say.

More activity

About 55% of advisers say they are seeing more first home buyers in the market. This is up from 39% last month and the strongest result since October last year.

Last year’s surge in young buyer demand fizzled out as worries surfaced about interest rates going higher and as a large number of sellers entered the market causing a decline in FOMO (fear of missing out).

This time around advisers say falling interest rates are causing people to expect stronger housing activity, with more buyers appearing.

It is the same story for investors. A record net 60% of advisers across the country say they are seeing more investors in the market. This reading is up from 47% in October and just 9% four months ago.

The turnaround in investor demand has been strong and Alexander says it looks to be due to falling interest rates offsetting the depressing effect on rents of rising unemployment and migration losses.

Debt-to-income (DTI) ratios are now becoming more of an issue for investors as bank test rates drop, advisers say. However, with test rates coming down, it does seem easier for investors to buy, one adviser says. “Rental shading has come down to 20% more or less.”

A notable feature of the survey is jump to 11% of advisers saying that people are opting for a floating mortgage rate. This appears to be driven by a desire to see what happens at the next official cash rate review next week with widespread expectations of another 0.5% rate decline. A high 88% of advisers say borrowers are choosing to fix their mortgage interest rates for 6 –12 months.

Tags: Market Close Tony Alexander

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Comments from our readers

On 19 November 2024 at 10:46 am Amused said:
No one seems to be mentioning the elephant in the room when it comes to why certain banks are now turning away new to bank customers wanting home loan preapprovals under 80% LVR. With these increased requirements now been imposed by the RBNZ (detailed below) the banks only want deals that are likely to settle. Preapprovals are just that most of the time, Preapprovals. If you accept these banks excuses made about processing times been the reason why they have stopped accepting applications, then you are forgetting the adviser channel has previously experienced service levels worse than this for our customers.

Transition path to higher capital requirements (taken directly from the RBNZ website)

The December 2019 Capital Review decisions include a significant increase in capital ratios. The new requirements began to be phased in from 1 October 2021. We are phasing in the increases in capital over a seven-year period, starting from July 2022. The most recent capital changes for banks in New Zealand were required from 1 July 2024.

By the end of the transition period in 2028, New Zealand's D-SIBs will have to meet the following minimum requirements:

a CET1 capital ratio of 4.5%
a Tier 1 capital ratio of 7%
a total capital ratio of 9%.

In addition, a D-SIB will be required to have a prudential capital buffer (PCB) of at least 9%, completely made up of CET1 capital. This will result in a total capital ratio of at least 18%.

For a D-SIB, by the end of the transition period in 2028, the PCB will comprise:

a 2% D-SIB buffer
a 1.5% counter-cyclical capital buffer
a 5.5% conservation buffer.
By the end of the transition period in 2028, all other New Zealand banks will have to meet the following minimum requirements:

a CET1 capital ratio of 4.5%
a Tier 1 capital ratio of 7%
a total capital ratio of 9%.
In addition, a non-D-SIB will be required to have a PCB of at least 7%, completely made up of CET1 capital. This will result in a total capital ratio of at least 16%.

For a non-D-SIB bank, by the end of the transition period the PCB will comprise:

a 1.5% counter-cyclical capital buffer
a 5.5% conservation buffer.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 5.79 5.49 5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 5.79 5.49 5.59
ASB Better Homes Top Up - - - 1.00
Avanti Finance 7.90 - - -
Basecorp Finance 8.35 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 5.79 5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 5.79 5.59 5.69
Co-operative Bank - Standard 6.95 6.29 6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - 5.99 5.89 -
First Credit Union Standard 7.69 6.69 6.39 -
Heartland Bank - Online 6.99 5.49 5.39 5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.60 6.65 6.40 -
ICBC 7.49 5.79 5.59 5.59
Kainga Ora ▼7.39 ▼5.79 ▼5.59 ▼5.69
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 ▼6.69 ▼6.49 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 ▼5.79 ▼5.59 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 7.94 ▼5.75 ▼5.99 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.49 6.95 6.29 6.29
SBS Bank Special - ▼5.89 ▼5.49 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 4.94 ▼4.89 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.19 6.49 6.39 6.39
TSB Special 7.39 5.69 5.59 5.59
Unity 7.64 ▼5.79 ▼5.55 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society ▼7.70 ▼5.95 ▼5.75 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
Westpac Offset 7.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 5.79 5.49 5.59
Median 7.49 5.79 5.69 5.69

Last updated: 12 December 2024 9:22am

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