Backlash against banks’ home loan processing times
Mortgage advisers are taking a stand against banks’ strung-out home loan processing times.
Friday, November 22nd 2024, 9:22AM 
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The Finance and Mortgage Advisers Association of New Zealand (FAMNZ) has labelled the wait times for adviser generated home loan applications compared to direct to bank applications “anti-competitive” that are hurting not only mortgage advisers, but consumers.
“The wait times are unacceptable,” Leigh Hodgetts, FAMNZ country manager says.
She has arranged meetings with senior management from the major banks to discuss this, along with recommendations from the Commerce Commission.
ASB closed pre-approvals earlier this month to new customers until today to ensure it is focused on reducing turnaround times.
The bank, in a written statement to TMM at the time, says it is “continuing to experience high demand for our home loans because of lower mortgage rates, subdued house prices, growing interest from first home buyers and investors, and customers looking to refinance.
“This environment has meant longer than usual turnaround times for some customers, and we are temporarily adjusting the way we process applications over the next few weeks by prioritising live deals and pre-approvals for existing ASB customers.”
On average most banks are now taking 10 days to process applications, whereas the normal time, particularly if a prospective home buyer was bidding at auction, would be three to four working days.
Hodgetts questioned if banks still care about the adviser channel and slammed recent bank comments encouraging consumers to go direct to get better deals and quicker processing times.
“Consumers want to use mortgage advisers for a good reason. Advisers drive competition, so we can only assume the banks are trying to prevent competition by making it harder for advisers to operate.
Hodgetts says more than half of all consumers choose to use a mortgage adviser, and it appears that lenders are taking these consumers for granted.
While FAMNZ is taking a stand and want to challenge banks, she says most advisers are not a member of any professional body, which erodes the influence in the sector. “There is power in numbers.
“There is no more time for apathy when it comes to protecting our industry. It’s time for action. If advisers want results they must be prepared to commit.
“Unless we bring a change of attitude and changes to procedures, mortgage advisers and their customers will suffer.”
Hodgetts admits that cynics may interpret her comments as a FAMNZ membership drive, but she says this misses the mark.
“It’s time for an honest acceptance that the industry is in a mess. The ComCom recommendations that advisers present clients with offers from three banks are creating confusion, lenders are trying to squeeze out the adviser channel, and unless we work together there will be more pain.”
The message to lenders, she says, is to support the wishes of consumers to use advisers, and work with them.
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Transition path to higher capital requirements (taken directly from the RBNZ website)
The December 2019 Capital Review decisions include a significant increase in capital ratios. The new requirements began to be phased in from 1 October 2021. We are phasing in the increases in capital over a seven-year period, starting from July 2022. The most recent capital changes for banks in New Zealand were required from 1 July 2024.
By the end of the transition period in 2028, New Zealand's D-SIBs will have to meet the following minimum requirements:
a CET1 capital ratio of 4.5%
a Tier 1 capital ratio of 7%
a total capital ratio of 9%.
In addition, a D-SIB will be required to have a prudential capital buffer (PCB) of at least 9%, completely made up of CET1 capital. This will result in a total capital ratio of at least 18%.
For a D-SIB, by the end of the transition period in 2028, the PCB will comprise:
a 2% D-SIB buffer
a 1.5% counter-cyclical capital buffer
a 5.5% conservation buffer.