Ballooning loan turnaround times at major banks are frustrating brokers just as demand for their services surges alongside the strengthening housing market, argues MyState Bank’s new general manager of banking, Huw Bough.
Broker confidence is on the rise as the economy recovers from COVID-19 and first home buyers take advantage of government schemes. According to the latest MyState Bank Quarterly Broker Survey, about two thirds of brokers are confident in growing their business this year as ultra-low interest rates boost demand and fi rst home buyers tap their superannuation to enter the market.
Brokers anticipate an increase in prospective clients over the next six months. Meanwhile, the uptake of technology and virtual advice during the coronavirus pandemic has meant brokers can do more business in the same amount of time, positioning them to meet the strong demand.
Approval times a roadblock
As they prepare for the influx of clients, brokers say turnaround times, the speed and frequency of changes around credit policies and the diff erent requirements of lenders are issues of concern. More than half say turnaround times have significantly worsened since the end of 2020. With some big banks taking up to 30 days to provide conditional approval, brokers are right to feel frustrated. With home loan applications at record levels and hot competition in the housing market, the speed at which a borrower can settle a loan is increasingly important.Brokers are focused on meeting customer needs with competitive solutions in a timely manner. However, long delays in processing an application from other lenders is now negatively impacting customers and refl ecting poorly on brokers.
Majors’ double standard puts brokers at disadvantage
Over the last couple of years, we’ve seen a widening in the disparity at the major banks between the time to yes if a customer walks into a branch versus the time to yes for a customer who deals through a broker when accessing the same product or service. Whether that is by design or due to poorresourcing, it is having an impact on the service experience that brokers can deliver to their customers.
At a hearing of the Standing Committee on Economics during their ongoing Review of the Four Major Banks and other Financial Institutions in April, the CEOs of Commonwealth Bank of Australia and ANZ both acknowledged the time to yes for home loans was different depending on the channel.
Discharge rates unacceptable
In an environment in which low interest rates make refinancing attractive, some lenders are taking up to 60 days to discharge a mortgage, well up from the standard 30 days.
This is an awful impost on a customer who has plans, who has reasons for wanting to access funds, and if it impacts the customer experience, it impacts the broker’s advocacy with the customer.
It also impacts brokers from a cash flow perspective. They are small businesses. Quite often they have investments, financial commitments and business plans.
Policy change continues
Another key issue of concern for brokers is keeping pace with rapid changes in bank policy.
Next on the horizon is the adoption of ASIC’s new guidelines for product design and distribution obligations (DDO) for financial products, which take effect in October.
As a result, lenders’ products and policies will be more nuanced to target customer segments, and brokers’ behaviour will align more closely to customer segments. For example, brokers specialising in the medico segment will move quickly, it will boost competition.
With their broad offering, big banks find it more challenging to adapt. We could see smaller banks and monoline lenders pick up market share.
Bank customers more willing to look beyond the big four
COVID has brought a change in behaviour, and you are now seeing customers looking beyond the big four banks to the smaller banks and lenders.
Often smaller banks can be more nimble and able to move faster because they aren’t burdened by reparations following the Hayne royal commission and are less impacted by COVID. Some of the big banks also had off shore processing that was impacted by the pandemic, whereas MyState Bank, for instance, has always done its processing in Tasmania.
It currently takes around eight to 12 days to receive unconditional approval at MyState Bank, compared to an industry average of 19.5 days.
When we make a promise to brokers, we keep our commitment, because the broker is accountable to the customer for the same commitment.
We believe the future is bright for broking. Looking ahead, my focus is to ensure that MyState is viewed as a trusted partner, and through that trust to help brokers reach their full potential and grow our market share in the broker space.