Mortgage advisers frustrated by bank delays as short-term fixing dominates

The latest mortgages.co.nz and Tony Alexander Mortgage Advisers Survey revealed mounting frustration among mortgage advisers over slow bank processing times for loan applications.

While borrowers visiting bank branches directly receive faster service, advisers report delays that are hindering buyers, particularly first-home buyers (FHBs), Alexander (pictured above) said.

Advisers also highlighted increased competition among banks, with cash-back offers and reduced test rates making borrowing slightly more accessible. However, the inconsistent application of lending criteria remains a challenge.

First-home buyer activity slows

The net proportion of mortgage advisers seeing increased activity from first-home buyers dipped to 26% in December, down from 55% in November. This marks the lowest level since July, though activity remains consistent with trends since the market improved in August.

Advisers noted mixed experiences:

• Some banks are easing borrowing requirements, but turnaround delays persist.
• Lower test rates are helping FHBs secure loans, but debt-to-income (DTI) rules are expected to affect single-income borrowers next year.

“Bank turnaround times are holding up first-home buyers,” one broker commented, highlighting an ongoing hurdle for this group.

Investors return but activity softens

Investor activity also eased this month, with a net 36% of advisers seeing more investor clients – down from a record 60% in November. Despite this decline, investors remain active, but they are not dominating the market.

Key insights from advisers include:

• Some banks apply stricter criteria for expenses like insurance and rates, while others don’t.
• Investors are returning in average numbers, with test rates easing slightly.
• DTIs could impact investors in main centres next year.

Short-term fixing remains strong

Borrowers continue to show a strong preference for short-term fixed interest rates, with the six-month term being the most popular. This reflects widespread expectations of further interest rate cuts in 2025, following the cumulative 1.25% reduction so far this year.

Fixing for longer than two years remains highly unpopular as borrowers anticipate more favourable conditions in the near term.

Refinancing interest declines

Interest in mortgage refinancing softened in December, with a net 17% of advisers reporting increased inquiries, down significantly from 49% in November. Despite the drop, refinancing interest is likely to persist while borrowers expect additional rate cuts in the coming year.

Lending sentiment improves

Banks’ willingness to lend continues to improve, with a net 33% of advisers reporting better access to funds – up from 17% in November. This is still below the September peak of 57% but reflects ongoing recovery since the 2021 credit crunch caused by tighter regulations.

The December survey reveals a property market still adapting to evolving conditions, with optimism around interest rates driving borrower decisions and investor re-engagement as 2025 approaches.

Visit mortgages.co.nz for more details. Download the full report.

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