New customers locked out of ASB’s pre-approvals

Mortgage advisers are not impressed.

In a note to mortgage advisers, the bank says it is now closed to new bank pre-approvals effective immediately to ensure it is focused on reducing turnaround times.

The bank, in a written statement to TMM, says it is “continuing to experience high demand for our home loans as a result 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. This is a short-term solution to manage the high volumes to ensure we continue to deliver exceptional service to customers as well as our mortgage adviser community,” the bank says.

ASB didn’t answer questions about whether this is a regular occurrence and whether it applies to bank branches. 

Whangarei-based Key Mortgages director and mortgage adviser Jeremy Andrews says banks pulling back on who they will provide pre-approvals to is becoming more common as demand increases and timeframes push out.

He says advisers regularly see banks only helping their existing 'main bank' clients, as they near the thresholds of low deposit lending they can provide under RBNZ rules.

It is unusual, however, to see banks limiting when they can lend to new bank clients with strong equity (e.g. owner-occupiers with a 20% or more deposit.

AdviceHQ director David Green says ASB doesn’t close pre-approvals often whereas other banks will go out of the market more often. “It’s unusual as I don’t know of any businesses that would say they don’t want new customers.”

Green says ASB’s move does limit options for clients but the bigger question for customers is which bank is the best suited for the loan and structure they want.”

“Banks closing down new customer pre-approvals can be related to volumes of applications banks are processing and the credit it has to lend. “Volumes can also mean a promotional product the bank advertises, gets a big run of applications for it and doesn’t have the resources to process those applications.”

ASB, says Andrews, has a traffic light system for mortgage advisers, which is a good way to see if it will accept applications for low deposit clients, being either main bank or new customers, existing mortgage holders or first home buyers. “This traffic light system doesn't seem to take into account strong equity clients so that shows how unusual this situation is.”

Interestingly, some banks seems to have a surplus of staff in their branches or direct channels and they can be quiet, particularly as the majority of home buyers are going through mortgage advisers to access loans, he says. “It would be great if all banks ‘overflowed’ their mortgage advisers home loan application backlogs to be processed by branches, but only a small proportion do.”   `

Often closing pre-approvals to ‘new to bank’ clients only applies to mortgage advisers and bank branches can still take applications from people going direct to them.

Andrews says in theory any closing of pre-approvals to new clients should be across the board (banks always talk about 'channel parity' as being a priority, and turnaround times came up in this year’s Commerce Commission inquiry into bank competition).

“It's frustrating when we see banks offering and advertising channel disparity . Yet, when main banks presented to the commission’s inquiry they indicated "there is no policy that would see us prioritise one channel over another".

But advisers have noted some banks trying to actively encourage clients to go direct. This includes advertising super quick turnaround times, overriding policies like pre-approving new to bank clients, and, in some cases, even attracting specific client bases, such as private banking, with stronger cashbacks direct.”

Green says one of the big four banks claims to have channel parity and has put it in writing but does everything to encourage clients to go direct to its in-house advisers. “It is a big talking point.”

Lack of channel parity has a definite effect on advisers’ businesses, Andrews says.

“We get clients who would prefer to have extra support from a financial adviser, but some are being forced to choose a direct channel based on turnaround times or new to bank approval policies.”

He points to an example this week where Key Mortgages prioritised an application for a client wanting to buy at an auction. The application was sent to two main banks with a short turnaround at Key Mortgages end.

The client also approached their bank direct due to urgency and got a quick approval. As a result, they were able to win the auction.

“In this case the client still wishes to proceed through us as the mortgage adviser channel, but we can no longer continue with one of these two main bank applications, as that would mean disengaging the client’s direct approval upon which they made their winning bid.”