Big banks stop trying to get new mortgage business
The major banks are playing catch-up as they struggle to process an unprecedented number of new mortgages, with eager buyers snapping up homes at auction before they have secured the funding to close the deal.
ANZ chief executive Shayne Elliot told The Sydney Morning Herald that the bank had pulled back on mortgage marketing because demand was so strong. Meanwhile, brokers said they were being run off their feet, rushing to secure a Monday-morning loan for buyers who purchased homes at Saturday auctions.
Hank Hong, senior mortgage broker at Mortgage Pros and an MPA Top 100 broker for 2020, said that buyers’ rush to purchase sometimes ended up costing them.
“Sometimes there’s a random person who goes off and gets a block of land they have been waiting for and they’ve jumped at it,” Hong told MPA. “Then the backwards situation happens and you’ve got to explain to them or you’ve got to go to a lender that has a lower turnaround time – and may have a higher rate – but that’s their only choice. They just don’t have options with everyone.”
Record-low interest rates combined with government support programs have sent home lending levels skyrocketing to record highs. Through March, a record 64,300 mortgages were bought by owner-occupiers and investors, according to the Herald. That’s more than 2,000 per day.
Loans to owner-occupiers in New South Wales hit a 12-year high in March, spiking 72% since May 2020. In Victoria, loans to owner-occupiers are at an all-time high after spiking by nearly 60% over the past 10 months.
But that’s nothing compared to the growth in Western Australia, where the number of loans taken out by first-time buyers has skyrocketed 664% since May 2020, the Herald reported. Loans to build new homes have spiked by 225%.
Hong said the rush to buy is keeping brokers busy – and pushing prices higher than many prospective buyers can afford.
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“At the moment we’re in uncharted waters,” he told MPA. “The market is insane. People are throwing a lot of money at everything and people are being priced out of a lot of areas. I think I’ve got about 40 clients that are sitting there with preapprovals, and all you can do is keep waiting until they find a property.”
Elliot said that ANZ was struggling to keep up with the “extraordinary” level of demand over the past six months. He said the growth was being driven by Australians returning home from abroad and prioritising homeownership.
“The first thing they want to do is buy a home,” Elliot told the Herald. “The volumes are unprecedented. We have not seen sustained high volumes like this ever before. When we built our machines, it was never imagined we would have to cope with these kinds of volumes every day of the week.”
Elliott said that ANZ had halted advertising for home loans as it raced to meet demand.
“In that world, you don’t actually need to do a lot of marketing,” he said. “In fact, it would just make things worse. We’ve toned down the marketing because we’ve got enough business to keep us busy.”
Brokers are also feeling the pressure, especially the Monday after a strong auction weekend when many prospective buyers make winning bids without having their financing ready, the Herald reported.
A spokesperson for Commonwealth Bank urged prospective buyers to speak with their lender before bidding at auction.
“We strongly encourage customers attending an auction to speak with their lender or broker so that they know exactly how much they can borrow based on the property they have chosen to buy and after a lender has formally assessed their financial circumstances, including credit and liability checks,” the spokesperson told the Herald.
Robert Simeon, director at Richardson & Wrench Mosman Neutral Bay, said that although he knew of a case in the area where a buyer was rejected for a mortgage after bidding without necessary approvals, most buyers were still ticking the necessary boxes before making an offer.
“No-one in their right mind would bid at an auction without approval – it’s financial suicide,” Simeon told the Herald. “You can’t drive a car unless it has petrol in it.”
