Home loan approvals take up to eight weeks as COVID-19 crisis pressures hit banks: brokers

Home loan approval times have blown out to up to eight weeks as extra COVID-19 crisis-related processes and the sheer number of customer inquiries take their toll, mortgage brokers say.

In pre-pandemic times, home-buying hopefuls were able to get a response from a financial institution within a week to get the ball rolling on their application.

But with a steady stream of first-time purchasers, refinancing requests and record number of loan deferrals being processed due to the pandemic-sparked recession, the banks are under the pump.

It comes as the value of new home loans that were granted rebounded 6.2 per cent in June as the economy reopened after the first wave of the coronavirus crisis, according to Australian Bureau of Statistics figures released on Wednesday and covering the period before Melbourne’s new outbreak.

But the value of new loans remains down on previous months, against a backdrop of a mammoth $274 billion in deferred repayments of home loans and small business loans.

All of this has had an impact on turnaround times for home loans, according to Mortgage Choice broker Deslie Taylor.

“In the past two months, we’ve submitted a record number of applications … it’s crazy how busy it is,” Ms Taylor said. “The flow-on from that is it takes longer for home loans to be approved.

“[The banks are] much more thorough in the assessment of the application, they’re coming back to ask more questions than they would in the past.

“For example for initial assessment, the average would be no longer than three to five days maximum [pre-pandemic] whereas the lenders are now sitting at nine to 12 days.”

She said on average, an unconditional approval was taking about three weeks.

Foster Ramsay Finance principal and mortgage broker Chris Foster-Ramsay said with the majority of home loan applications affected by the pandemic, coupled with a major push to attract new customers through low fixed rates, banks were inundated with work.

“Living expenses, income and verification of documentation is becoming much more serious and much more in depth,” he said. “The bottleneck is due to both the number of applications in the system … as well as verification over and above what is being done.

“There was a massive push in April, May and June by a lot of lenders to entice consumers to refinance with rebates led by ANZ … who went very hard with their refinance rebate and really took on a lot of work.

“Their doors are essentially shut at the moment, [saying] don’t send us any work at the moment.”

He added that the approval process for some banks now took anywhere between two to eight weeks.

“You’ve got other banks like CBA, Bankwest and Macquarie Bank who have been able to hold their times of two days to a week, which is what it normally would be.”

An ANZ spokesman contacted by Domain confirmed home loan approval wait times at the bank had lengthened to eight weeks due to record volumes of applications, with a large share from refinancing requests.

The bank has since added extra resources to deal with the workload and prioritise applicants who were buying a new home over refinancing in a bid to reduce wait times, which should be down to three weeks as a result, according to the spokesman.

On top of the extra workload of meticulous checks and verification of applicants’ information, the banks themselves have been hit by the pandemic in a range of ways beginning with offshore processing credit teams, which caused delays at the outset.

But that has been compounded over time as the pandemic continues to throw logistical hurdles as well, according to Hunter Galloway mortgage broker Jayden Vecchio.

“It’s that [issue of remote credit teams] and also the banks had the deferral process so they had to re-allocate staff to that because they didn’t have automated processes,” Mr Vecchio said. 

“You have the flow-on effect of a valuer unable to physically inspect properties. Some banks use external solicitors … because there are so many people involved in the ecosystem, a one-day delay here and a one-day delay there blows out the process.

“The first-home loan deposit scheme was also added to the workload. On the 1st of July, NAB and CBA … got hit by a big spike of applications. That’s also caused processing backlogs.”

SmartMove mortgage broker Michael Letts said the sheer volume had naturally slowed turnaround times but some lenders and applications were picked up within two days.

“Each application is a case-by-case scenario,” he said. “If they’ve got a stronger deal, then they might be looked at a bit more favourably.”