Big four banks tighten mortgage approval times


National Australia Bank CEO Ross McEwan told the home economics committee on Friday that the NAB could green light a ‘vanilla’ home loan in less than 24 hours.

“For a simple mortgage, in one of our agencies, 50% are [approved in] less than a day and the remaining 50% less than five days, ”said McEwan.

The CEOs of the Big Four banks were all questioned late last week by Liberal MP Tim Wilson, who chairs the House of Representatives Economic Committee, about their ‘yes time’ for loan approval Mortgages after the government’s plans to abolish responsible lending laws – to help credit flow – have been delayed because it has not been able to attract sufficient support for the changes in the Senate. This followed lobbying from consumer groups who feared changes could result in vulnerable borrowers receiving loans they could not repay.

Inefficient processes

Banks have assured the government that removing the laws will not open the credit floodgates, as Australian Prudential Regulation Authority lending standards will continue to require strict approval standards.

Banks acknowledged that an area-focused regulator would help them at the margins, noting that proposed changes to responsible lending would simplify application processes for customers.

However, documents presented to the Economics Committee last week show that banks are making significant strides in overcoming ASIC red tape regardless, by investing in their own systems and removing inefficient processes that were slowing them down.

Mr McEwan said NAB has introduced a streamlined home loan process over the past six months that has reduced the number of bankers processing the loan, thereby shortening the time customers wait for approval.

Double whammy

The speed of approval times at some lenders swelled to more than a month at worst in 2019, as banks became cautious about verifying spending in the wake of the “wagyu and shiraz” affair that the corporate regulator sued Westpac, which the bank ultimately won.

Investors will take a close look at improvements to the system when Westpac, ANZ and NAB release their financial results for the first half of their fiscal years in the first week of May.

ANZ Bank was hit with a ‘double whammy’ as it grappled with a systems upgrade that downsized multiple platforms into one at the same time, while taking a more cautious stance, which led the bank to give up an astonishing 0.75% market share in just 12 months.

ANZ chief Shayne Elliott said on Friday the key factor determining mortgage approval times was the volume of applications to the bank, revealing that at the start of the year it had been inundated of claims as customers sought to repair ultra-low rate loans.

This came in the wake of the Reserve Bank’s COVID-19 rate cuts that prompted banks to bring mortgage deals to market at an all time high, which helped spur a first homeowner buying boom. .

“If you are an ANZ customer that we have known for a while and you walk into an ANZ branch, you will walk out of this meeting with a ‘yes’, you will know it literally within an hour,” Mr. Elliott said. .

However, evaluating new clients would take longer. “If you are a new customer of the bank, and we do not know you, and you go through a broker channel for example, a little more distance … if you come with all the right documents, the right pay slips and all pieces, you will usually get a response in 10-12 days.

Westpac CEO Peter King revealed on Thursday that the bank has made progress on turnaround times, after its approvals reached up to six weeks in some cases as the crisis hit. a year.

Westpac received a heavy blow in March last year after being forced to close its treatment center in Manila by Philippine authorities and returned the operation to Australia. The bank began triage of loans that were due to be paid within the next five days as it reduced a 30-day backlog of applications.

But Mr King said Westpac now processes around 12% of mortgage applications in two days and 50% in 10 days. However, he also pointed to a cohort of more complex loans that took longer.

“For a quick and easy loan, ie PAYG, we want to do it in less than two days,” King said. “It depends on what customers want and the type of transaction.

“More complex transactions take longer, when you get into more complex trusts or family matters it takes a little longer. I would say I want to improve this.

Responses show that Westpac, ANZ and NAB are ending a key competitive advantage enjoyed by Commonwealth Bank, which gained mortgage market share over rivals in 2020, as it remained confident that its approval processes can be done at both quickly and in a manner consistent with responsible lending requirements.

Mr Comyn said on Thursday that ABC’s turnaround times remained under “operational pressure” as the best house price performance in more than a decade triggered a corresponding 40% increase in claims mortgage loan.

“It would be within two days. His brokerage channel would be slightly longer than that. For most of the past 18 months, we wouldn’t be too far from that, maybe a few more days, ”Mr. Comyn said.

The ability of banks to make quick decisions about whether an applicant should get a loan will help support the boiling housing market as auction close-out rates rebounded in the March quarter.

Mr Comyn said the CBA expected domestic house prices to rise 10% during the 2021 timeframe. Mr King of Westpac said they could do the same in 2021 and 2022. Mr. ANZ’s Elliot expects even faster growth, saying on Friday house prices could even rise as much as 17 percent before Christmas.