While the Australian housing market continues its hot streak, getting approval from a mortgage broker for some is turning out to be half the battle.
Mortgage brokers and potential property buyers are beginning to get answers on why waiting times for loans between direct channels and brokers are so different thanks to the Federal Parliament beginning its investigation into the causes of these higher-than-normal turnarounds.
As the demand for new loans has increased, mortgage brokers believe that the difference in time between applications they submit and ones submitted is as delayed as ever, with broker channel loans taking up to three times longer to approve.
The House of Representatives Standing Committee on Economics inquired with seven Australian banks to learn their median and average loan approval times through branches and brokers in the March quarter and the reasons they cite for the disparity between the two channels.
According to the newly-released report, National Australia Bank (NAB) offers the shortest wait time on average for unconditional approval via brokers at 12.4 days compared to a 6.1-day rate for direct applications.
The Commonwealth Bank of Australia offers the shortest average wait time for direct loan applicants at only two days and the second shortest wait for those applying through a broker, averaging 16 days.
Suncorp sits in the middle of the group, with an average wait time of 18.3 days for approval on direct loans and 20.7 days on average for those applying via brokers.
CitiGroup is close behind, citing a 19.5 day wait on average for direct applications and 20.8 for applications through a broker.
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Finally, Bank of Queensland reported a 19.1 day turnaround time on loan approval for branch applicants, and the highest average wait time for broker applicants, 26.2 days.
Westpac shared only its median wait times, with 11 days turnaround for branch applicants and 23 days for broker applicants, while the committee has published no response regarding ANZ.
Virgin Money reported the highest average wait for direct loan applicants of 24 days, but the company declined to disclose the data for those applying through a broker.
Why are loans through brokers taking so long?
The two banks with the most significant disparities between wait times for each channel, CBA and NAB, each cited a rise in demand of broker channel applicants as the reason for the increased waits.
According to NAB and Westpac, another reason for the large gap between channels is that the broker application software tends to require more manual work for processing compared to branch applications which are generally more automated systems.
CBA also added to this, sharing that broker applications have a higher rate of first-time applicants and demand more personal attention due to the higher complexity of information and verifications required.
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Despite the spike in approval turnaround times for Australians applying for home loans through brokers, the banks do not feel that it will harm their competitiveness.
“We know that customers use mortgage brokers for a number of reasons, including access to multiple lenders through one individual,” NAB explained in a statement.
“While the time to approval can be slow, this doesn’t necessarily make brokers less competitive, as customers save time from having one application and one point of contact for multiple lenders.”
Westpac, CBA, and BOQ have all stated that they are taking various actions to improve the quality of their broker application programs and speed up the process for applicants, but time will tell whether the disparity shrinks.
Despite these delays, brokers had their second-largest market share of home loans dating back to when records began, with $62.2 billion worth of loans settling in the first quarter, amounting to 57.5% of new loans.
Words by Rimas Veselis
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