The speed in which banks can approve mortgages from those going direct and those going through brokers is a major problem that needs to be addressed imminently.
Over the past year, brokers have been telling us that the “time to yes” (turnaround times) for major bank home loan customers going through the broker channel are drastically slower than those going directly to the bank branch.
Now, we have confirmation. The recent commentary from the major bank CEOs has confirmed what we’ve been tracking in the Broker Pulse survey for months; loans being written by brokers are taking longer for the bank to approve than they are through bank branches/online.
The galling part about all of this is that there does not seem to be any appetite from the major banks to fix it.
This is a major problem.
Not only is it a problem for the ability of the broker channel to compete on a level playing field (raising competition issues), but it’s also a problem for home loan customers more generally – and, therefore, the economy as a whole.
With the government repeating its commitment to free up credit and improve the speed in which Australians can access credit (for example, through its COVID-19 support measures and proposed repeal of responsible lending laws), this is something that should and must be addressed.
First and foremost, the fact that we are having this conversation this far down the path of the evolution of the broker channel is just ridiculous. Brokers now account for 60 per cent of all new mortgage volumes and broker share has been growing for the past two decades, so why the bigger institutions cannot get this right is just beyond me.
If you have customers choosing to use a broker but wanting a particular bank to provide the loan, too often now the broker is unable to provide that particular service to that particular borrower in a speedy manner. But, if the customer was to go direct to the bank, it is smooth, speedy sailing.
The question is: Why?
First and foremost, this is poor service from the banks. There is little excuse in this day and age for it. If they have the technology to approve loans directly in a day, why can they not do the same through the broker channel?
It cannot be that ALL loans coming through brokers are more complex.
Why can they not provide brokers with the same service and same speed as they do for direct?
If the major banks do not fix this soon, they are in for a rude awakening.
With the evolving way that borrowers want to access home loans, lenders are going to find that brokers are going to be advising their clients to go to the institutions that can deliver turnaround times quickly.
Indeed, mortgage brokers are now bound by a best interests duty to their clients, and turnarounds are an increasingly important factor for borrowers. With the property market being so hot, borrowers cannot afford to wait a month for their loan to be approved. Their dream house will be bought by someone who already has finance in place. That business deal that they wanted to take advantage of will have expired.
In the long term, if the major banks do not fix their channel conflict when it comes to time to approval, they will miss out on the business from brokers. And, as we know, this is 60 per cent of all mortgage business.
Looking at the way volumes are going, and the growing percentage of borrowers that are choosing to access a mortgage through the channel, this is a looming liability for banks that want to have deep relationships with their customers through the third-party channel.
The major banks know what kind of borrowers and what kind of deals are going to go through the broker channel. There is really no excuse for these delays in broker channel turnarounds.
If there is such a significant flow of volume going through the broker channel, then they should have the proper resources to manage them.
If there is a difference in the quality of information coming through this channel, then they should put in place resources or technology to address them.
It is not enough for these CEOs to acknowledge the problem. They need to do something about it.
If they don’t, they will soon find that their share of the market – and therefore the money that they can make – will start to drop.
Alex Whitlock is the co-founder and director of Momentum Media.
Alongside Phillip Tarrant, Alex started Momentum Media with the mortgage broking titles The Adviser and Mortgage Business.
He is director of mortgages and co-hosts the Mortgage Business Uncut podcast.
As well as being an advocate for the mortgage broking profession, he is also an active property investor, regularly contributing to the Smart Property Investment podcast sharing his strategies and experiences as a property investor in Australia.
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