Macro-prudential measures were always going to have side effects. Brokers are now seeing the fallout as lenders use special offers to manage their regulatory caps.
APRA’s measures to limit lending on investor and interest-only mortgages are impacting all ADIs, including the mutuals. At a recent roundtable discussion in Sydney, Bank Australia’s head of third party Richard Irving explained that one of the biggest challenges for mutual banks right now is managing their lending limits “just like the bigger banks do”.
“Our communication has to be clear to brokers and we need to set those expectations early,” Mr Irving said.
Turnaround times have been a constant bugbear for brokers. However, Mr Irving explained that consistency of service is a more pressing issue.
“What brokers keep telling us is that if they know we can consistently deliver, then they can set those expectations for their customers.”
Perth-based broker Michael Deegan of Do Financial said that some lenders that are under APRA’s limits have been coming out with new rates or products in an effort to win more business.
“Everyone will rush to them and all of a sudden there is a blowout.”
Mr Deegan has seen an increase in turnaround blowouts since APRA’s measures were introduced. He has now started reconsidering refinancing his clients.
“We are encouraging our customers to stay put for the moment and just watch what the market does, because this inconsistent approach to releasing a headline rate to try and attract the business, all it’s doing is throwing service times out.”
He added that the rate being chased at the moment won’t be the same in six months’ time.
“If I could offer some advice to the lenders, it would be to stop coming out with these offerings. Just sit tight for a few months and let the market settle down.”
Beyond Bank's head of third party, Darren McLeod, explained how the lender was “caught out” by how quickly the market moved as lenders pulled out of various segments.
“I think we underestimated the fact that a broker, even though they don’t know your brand or much about you, will jump on you in this market if you have a product that nobody else does,” Mr McLeod said.
He added: “You can quickly become inundated with applications, even if you haven’t been promoting a particular rate. The market can move overnight and balancing high demand with your quality and service levels is important. The tap can really get turned on quickly.”
[Related: Major bank mortgages to go digital]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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