Mortgage applications taking longer to process

Turnaround times for mortgage applications have slowed, forcing many borrowers to wait longer for a decision, mortgage advisers say.

Only one bank currently provides pre-approvals for new customers, meaning that most require borrowers to have an offer accepted subject to finance or to have satisfied all conditions before bidding at an auction.

Mortgage adviser Connie Wang (pictured above left), managing director at Prosperity Finance, said that traditionally, three to four working days to process a mortgage application (from lodgement to decision) was considered normal. 

But over the last few months, Wang said that service levels across the five banks have dropped.  On average, she said, it took banks 10 working days to process “live deals” (signed sale and purchase agreements subject to a finance condition).

Over 2020 and 2021 when mortgage interest rates were low and mortgage application volumes were strong, turnaround times were faster than the levels seen currently, Wang said. 

“It’s not right … there’s not so many applications there now and there appears to be a supply issue,” Wang said.

However, ANZ, ASB and Westpac told NZ Adviser that the level of complexity, their existing application volumes and missing necessary information could cause turnaround times on mortgage applications to vary.

The banks also said it was their intention to maintain the same service levels across the direct and adviser channels

Wayne Henry (pictured above right), managing director and mortgage adviser at Wayne Henry Mortgages, said that there had been a “noticeable difference” in processing timeframes, and that there appeared to be “no simple solution”.

“It’s never been this clogged in the system … it is difficult, especially with deadlines,” Henry said.

Real estate agents were often looking to get the quickest deal across the line for their client and Henry said it was reasonable for borrowers to expect an answer within five business days.

“It’s difficult for advisers or even for bank staff to get across the line,” he said.

Wang, who has worked as a mortgage adviser for 12 years, said that despite best endeavours to ensure applications were completed to bank standards, questions from banks regularly resulted in further processing delays.  

“For example, [one bank] says they can provide approvals in seven working days but if they have a simple question and need to clarify something, they send it to the back of the queue and that’s another seven working days,” Wang said.

REINZ October figures show that the national median selling price increased 1.9% month-on-month to $795,000, with the number of properties sold up 20% compared to the same time last year.

As mortgage interest rates fall as the official cash rate is cut, Wang said that the property market is  starting to pick up, meaning that demand for finance was likely to increase.

Mortgage pre-approvals pulled

A pre-approval allows borrowers to search for properties with an understanding of their finance limit, which is valid for a specified period.

But Wang said that the majority of main banks had recently stopped providing them, citing the need to reduce turnaround times.

Wang said she was concerned that high volumes of pre-approval requests at one bank could further exacerbate processing challenges and risked pre-approvals being off the table completely. 

“The property market is starting to pick up: first home buyers and investors are competing, and they want pre-approvals so they can go to auction,” Wang said. “Even though they know we provide good value, if we can’t provide a pre-approval, there’s no value.”

Borrowers forced to approach banks directly

Due to a sense of urgency around getting finance approved, Wang said that in some instances, her clients had gone into a bank branch and were able to receive a prompt decision.

This could mean that some borrowers miss out on getting independent advice on how to structure their lending.  

“Clients can still apply directly at a bank branch … it makes us [advisers] look bad and the clients lose the opportunity to get independent advice. It will impact them in the long run as they may not have the right structure or receive independent advice.”

What’s holding up processing times?

Henry acknowledged that banks may be going through a transition where they were recruiting new staff, noting that mortgage products were not simple to learn.

“If you get it wrong, there are consequences … I think banks have been pretty cautious in their approach,” Henry said.

Wang said that longer turnaround times appeared to stem from a supply issue and that existing staff members she had dealt with appeared to be under pressure to meet the key performance measures required of them.

Henry said that due to due diligence requirements, advisers were held to a high standard with the mortgage applications they put through.

“Advisers may need to check their processes to ensure they’re getting all the information through to the bank and that there’s no delay each time a bank needs additional information,” he said.

ANZ, ASB, Westpac respond 

NZ Adviser approached three of the five major banks (ANZ, ASB and Westpac), to ask them about target service levels and any current challenges causing application processing times to increase.

A spokesperson for ANZ said that advisers could currently expect mortgage applications to be processed “within six to seven business days”.

A Westpac spokesperson said that the bank’s target turnaround time for mortgage applications was “five to six days” and that it was currently operating at “around 10 to 11 days” for adviser applications. 

ASB did not provide a service level target, but a bank spokesperson said that demand from first home buyers and investors off the back of falling interest rates meant turnaround times were “longer than usual” for some customers.

The banks said that the level of complexity, their existing application volumes and missing necessary information could cause turnaround times to vary.  Ensuring all necessary information is submitted upfront would help them to process an application as quickly as possible.

A spokesperson for ANZ confirmed that the bank currently offered pre-approvals to customers, while ASB and Westpac said that pre-approvals were available to existing bank customers.

“We have excellent resources available to our accredited advisers to support them in determining the required information,” the ANZ spokesperson said.

A spokesperson for Westpac said that the bank was working hard to return to usual service levels and noted that November and December were typically peak periods for application submissions.

“To ensure we’re providing services within our target turnaround time, we’re currently offering pre-approvals to Westpac customers, and on applications for Kainga Ora First Home Loans”, the Westpac spokesperson said.

“We’re still accepting live deals for new to bank customers.”

A spokesperson for ASB said the bank had “temporarily adjusted” the applications it is accepting to process and prioritising live deals and pre-approvals for existing ASB customers.

“This is a short-term solution to manage the high volumes, and to ensure we continue to deliver great service and reasonable turnaround times to customers as well as our mortgage adviser community,” the ASB spokesperson said.

In response to whether the same service levels are maintained across the direct and adviser channels, bank responses indicated that this was their intention.

“ANZ does not favour direct channels over adviser channels and turnaround times are similar across both channels over time,” the ANZ spokesperson said.

“We’re continuously looking to optimise our processes to ensure we’re providing appropriate and timely decisions on applications across all our channels,” a spokesperson from Westpac said.

ASB said that mortgage advisers were “a very important customer channel” for the bank.

“We’re committed to being transparent with them and keep them regularly informed of our turnaround times,” the ASB spokesperson said.

Additionally, ASB said that the bank was currently recruiting for a number of new roles to help support an increase in demand and that internal systems and processes were in the process of being enhanced to ensure it could respond “as quickly as possible.”

NZ Adviser was able to confirm that over the 2024 financial year, 61% of ANZ’s new home lending was originated via advisers (52% of its portfolio). For Westpac that figure was 63% and for Kiwibank, adviser-originated loans sat at about 70%.