The frustration levels among advisers are high. Many believe all the banks are doing is trying to incentivise customers to go direct to them and bypass advisers.
The nub of the issue is banks stringing out mortgage application processing times for advisers but giving a fast turnaround – as little as 24 hours – to clients who go direct to their branches.
It has shocked many advisers, particularly as banks were able to process applications much faster when lending was 15-20% higher than it is now and the housing market was moving at a much faster pace.
Mortgages Online founder Hamish Patel says it doesn’t make sense. “There was a time when advisers had access to only one bank, but still gained clients’ trust. There was a time when banks advertised a much better deal if borrowers went direct, and we still gained market share. Then there was a time where advisers were subject to a huge raft of regulations, which changed how they operated, and the adviser channel still grew.”
He says nobody can understand what has happened this year for all banks to have long processing times.
In some instances, adviser clients are waiting for up to 10 days to get an answer on their mortgage application, only to go to a bank branch and have the same application approved within 24 hours.
Most advisers say the banks don’t appear to want to change their longer mortgage application processing times and are making no effort to rectify the situation.
Gaslighting
Northland adviser Sarah Curtis, posting on Linkedin, says she is starting to wonder if running a mortgage advisory business is all worth it.
Rules between borrowers going direct to bank branches or an adviser are different she says, despite lenders claiming there was no channel discrepancy when they were in the same room as the Commerce Commission and advisers just months ago.
“Were lenders being upfront in these discussions and are aggregators able to provide evidence to the contrary?”
Curtis says it is clear advisers are being gaslit, told things aren’t different, that their turnaround times are the same and the policies for what LVRs they will approve aren’t different. “But they are.”
She is having to tell clients she has worked with, some for months, to go to the banks direct to meet their timeframes. “Those I am not telling, we are having to constantly chase, push, ask nicely and not so nicely, when the ‘bloody hell’ we will hear about their application.
“I know we present immaculate applications - our people we work with at the banks tell us this. It’s why we put so much effort into building relationships with our clients.
“I know the advice we offer is worth waiting for, especially with regards to loan structure and ongoing plans.
“So, when it feels like the organisations you have to work with in order to sustain your business are deliberately forcing people to choose not working with you because you do too good of a job, it is heartbreaking.”
Same excuses
Banks are wheeling out the same excuses for the longer processing times, including higher demand.
This doesn’t make sense to Patel who says not that long ago banks were lending 15-20% more than now and the housing market was in a frenzy. “They didn’t lengthen their processing times then.”
He says banks are tending to forget advisers take a lot of admin work off banks that doesn't get seen. “It's perfect for a lender such as Kiwibank because it doesn’t have a branch network.”
Patel believes longer processing times are not good for competition.
Lending growth enablers
It is almost as through the banks have a different view on growth, he says.
Advisers are the enablers of lending growth. About 60% of banks’ mortgage applications are originated by advisers. “Slowing us down is strategically a short-sighted move.
“There has been a big increase in applications volume recently but in the past six months there has also been a simplification of the regulations for assessing a deal.”
Patel is hoping the prolonged processing times is not a desperate move by a couple of banks which have lost considerable market share.
Advisers are not hearing of any bank employing more staff, although ANZ is perceived as throwing resources toward alleviating the problem.
Patel says it feels like the banks want to go cheap because debt-to-income (DTI) ratios are on the horizon, and they don't want to overcommit fixed expenses when they might hit a cap in six months. “It might be they're thinking, well ‘why should we throw everything at it when if we lend too quickly, we're going be limited anyway’.”
Advisers aren’t buying the “tick box excuses” for this situation especially as the banks are turning over billions of dollars in profit.
Because of the delays Patel says advisers are now forced to do applications to multiple lenders at the same time because they don't know which one will be picked up first.
“By the time a bank picks up the deal, they ring us to ask if we still want them to process it. A lot of the time it is a ‘no’ because we've already had an offer from another bank.”
He says advisers need to double down and make their value to borrowers even stronger. “What we are doing is already correct – putting in the work and goodwill – and it is proving itself in that clients won’t be swayed by cheap tactics anymore and the banks are not appreciating this.”
Trying to slow the mortgage adviser industry down is not only bad for borrowers but also the economy in Patel’s opinion.
It is short-sighted, he says, because when the economy slows down lending is needed. “The Reserve Bank is trying to get the economy moving by lowering interest rates. Advisers are at the start of the flow. We are the tap. If we are slowed down with longer processing times, the whole economy is slowed down. It means the economy is now waiting a month for liquidity – the worst move in a recession.”
Second class citizens
It baffles Craig Pope of Wellington-based Craig Pope Financial Wellington that if a client legally nominates and adviser to act on their behalf, they get treated like second class citizens by banks.
He says whilst these challenges with processing times come in cycles, this would have to be one of the worst. For some banks to not even pre-approve 80% LVR or less loans is unheard of.
“In the past banks were highly conscious of longer processing times and would do their utmost to hire more staff and solve the problem. Now, I'm not seeing that same sort of activity amongst the banks to solve the problem.
“And we've not seen any bank branches pick up the slack of taking over and assessing deals as they have in the past.
“No solutions are being offered, which suggests something else going on.”
Pope says coincidentally processing times were strung out just when the Commerce Commission suggested clients should be offered lending deals from three banks.
That has not become official and Patel says advisers need to ignore it.
“Putting the other reasons aside, how is that supposed to work if the banks refuse to assess applications without a live sale and purchase agreement,” Pope says.
“Maybe the banks are subtly trying to make that difficult, especially with the commission saying it wants to see advisers creating more competition.
“And perhaps the banks are trying to front foot that by making it difficult to happen because of the slow turnaround times.”
He says advisers would have to be “pretty cynical” to think that.
Another reason for the longer processing times, he says, could be the banks are not spending money on the adviser channel to make their margins look better, Pope says.
“Is it part of a bigger overall strategy to make more money and keep costs low?”
And, of course, part of that trying to retain profitability, is that volumes were a bit low six or nine months ago, he says.
Banks might have had natural attrition of staff and not rehired them or got their systems operating better. It's difficult to know what might be going on. It's hard not to feel cynical.
“It's just a bizarre situation and hard to know what is going on in the background.”
