Australia's largest peak body for the mortgage broking industry has voiced concern about comments made by Big Four bank CEOs regarding loan approval times.
The Mortgage & Finance Association of Australia (MFAA) has hit back after various bank CEOs stated to the House Economic Committee in Canberra that bank branches, and not mortgage brokers, were the quickest way to get a loan approved, and that loans with Big Four banks can be approved within hours or a few days. Data from two major aggregators say that those who apply for loans with Big Four banks wait a median of 23 days to get their loans approved.
“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,” said Mike Felton, CEO of the MFAA.
“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.”
Big Four bank CEOs described the broker channel as taking “slightly longer” than in branch and as taking “an average of around 12 days” to get loans approved, causing outrage in the broker community.
“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,” said Felton. “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.”