Advisers say a lack of staff to process home loan applications, coupled with rising activity, have made the situation even worse than 2019.
"I think it has accelerated," said Squirrel's John Bolton. "The Auckland market has sprung back to life, and we're seeing a lot more 95% LVR stuff. There's higher levels of complexity, extra compliance and more paperwork. The volumes have blown the banks out," he added.
Bolton said banks were understaffed at central processing centres, causing some applications to be delayed by 1-2 weeks. "I'd consider 2-3 days a normal response time, but it's getting to a week before they look at a deal."
Craig Pope, of Pope & Co Mortgages in Wellington, described turnaround times as a "nightmare" in the current market.
"To make it worse, people are in a mad panic trying to put cash offers in on houses so are very impatient trying to get quick answers. So it's a bit of a perfect storm. We are stuck in the middle trying to manage clients' unrealistic expectations with the slow turnaround."
Glen McLeod called on banks to take action to improve the deteriorating situation. He said BNZ was taking eight days to process applications, while other banks took between two to six days.
"We are definitely finding that the turnaround times are affected," McLeod said. "Also, the experience of some of the team members that are looking at applications and asking questions that have been clearly stated in the application diary note. We are told that it is not helped by advisers sending in [many] applications to several lenders and then choosing after they have four approvals."
McLeod said there was "frustration all around": "We want to provide an excellent service to our clients and our lending partners. Something has to give. Either the banks need to staff-up or they need to talk to advisers that have a low conversion ratio and find out why."
Mortgage advisers cited staff shortages and turnaround times as one of the biggest problems facing the industry, in economist Tony Alexander's latest quarterly survey.
Squirrel's Bolton said banks and advisers needed to find a cross-industry solution to the ongoing problem. Technology could prove vital, he said.
"Technology should ultimately play a bigger role. There's still a lot of double-handling of applications going into the banks. There's a big opportunity for us to standardise forms and make things better for everyone. Our industry and the banks need to solve this together."