The mortgage broking industry has voiced concern over recent statements by the major bank CEOs that their approval times on home loans through branches were now reduced to a matter of hours, or a few days at most, whilst approvals for the mortgage broker channel ranged from “slightly longer” than the branch network to “an average of around 12 days.”
This is not the case according to data provided by two major broker aggregators. Latest data on approval times for the mortgage broking channel shows that Australians who apply for loans with the “Big Four” banks using a mortgage broker are waiting a median of 23 days, or more than three weeks for unconditional approval.
Mortgage & Finance Association (MFAA) CEO Mike Felton said the broking industry was confused and concerned by the statements of the CEOs of the major banks, and by the likely impact on consumers.
“We are obviously concerned that the leaders of major lenders are promoting these turnaround times, when most customers applying through brokers – who represent approximately 60 per cent of all Australians seeking a home loan – are experiencing nothing of the sort,” Mr Felton said.
“For brokers and their customers, this is not a level playing field, and the evident prioritising of customers who come through their own branch network is having a massive competitive impact.
“In today’s extremely competitive housing market, waiting more than three weeks to be approved is a nightmare for customers who are trying to bid on a home and secure finance,” Mr Felton said.
Mr Felton said that while claims of the lender CEOs varied, they were consistent in their message that home loan approvals through the branch network were being approved within hours or days – significantly quicker than those received through the broker channel.
“The big four bank CEOs claimed that approvals for the broker channel ranged from “slightly longer” than the branch network to “an average of around 12 days.” This is a gross underestimate of what brokers are experiencing, and in no way supported by the data,” Mr Felton said.
“While the Big Four have been lauded this week for bringing down approval times, listed major aggregator AFG released its Mortgage Index to the ASX last week. This showed that turnaround times have spiked to a three-year high for AFG brokers to a median across all lenders of 27.1 days for the quarter ending 31 March. At the same time, major aggregator Connective has released a new data source that shows that the median unconditional approval times for loans approved in the past week by the Big Four via Connective brokers was 23 days, with individual big four lender medians ranging from 19 to 36 days.
“These numbers are in stark contrast to the approval times recently presented by the Big Four banks to the Standing Committee on Economics, and potentially represent a major disadvantage for any customer who wishes to benefit from the experience and choice offered by a broker but does not want to, or is unable to, borrow through the branch network of our four largest banks.
“Beyond the disadvantage to Australian consumers, when ‘time to yes’ in the branch is 1 to 5 days, and around 23 days through a broker, it makes it incredibly difficult for mortgage brokers to compete, which poses risk to the broker channel and competition in the home lending sector. And reduced competition inevitably results in higher prices and interest rates for consumers,” Mr Felton said.
The MFAA accepted that higher volume impacts turnaround times, and there has been record volumes of home loan applications over recent months. However, the data suggests that mortgage broker customers have consistently borne the brunt of any resource shortages.
“We understand that absolute turnaround times may vary with volume, and that processes between channel may differ, but this incredible differential between the major lenders’ approval times in the branches versus their approval time for the broker channel is significantly undermining the mortgage broker offering,” Mr Felton said.
“The MFAA has been in regular contact with the major lenders and we are aware and pleased that they are attempting to address the problem, but after a slight improvement at the start of 2021, average turnarounds for the mortgage broker channel have plateaued and are now starting to increase again, culminating in their worst quarterly result in three years.
“We are calling on lenders to meaningfully and permanently address the differential between branch and broker turnarounds as a matter of urgency. Brokers assist 60 per cent of all new mortgage customers – customers who should not be disadvantaged by the banks. Mortgage brokers must be allowed to compete fairly with the bank branch, or competition in the entire home lending market faces significant risk.
“We will continue to raise the issue with lenders and other key stakeholders until it is resolved,” Mr Felton said.
For a PDF version of this media release: MFAA Media Release PDF