Expectations banks will improve processing times within weeks

NZFSG has more than 1,100 advisers in its network and Martin says although the frustration level among them is high about the 10 days plus processing times, banks are acutely aware of the problem and are actively trying to fix it.

Martin expects to see a definite improvement for adviser generated home loan applications within weeks to show banks are walking the talk.

Advisers’ irritation is palpable as they feel the main banks are stringing out processing times for them but giving a fast turnaround – as little as 24 hours – to clients who go direct to their branches.

Martin, however, is not sure whether the FMA would be the best avenue for advisers to voice their exasperation.

“I have had advisers mention that the Commerce Commission should look at the issue in terms of competition and put some pressure on the banks to ensure customer outcomes are the same regardless of whether they use a mortgage adviser or go direct to the bank.”

After proactive discussions with the banks generally, and on individual transactions, after significant feedback from NZFGS members about the issue, Martin says he would be more inclined to take formal action if he felt it was a deliberate ploy to slow down mortgage processing times in favour of their proprietary channels.

“I don’t feel this is the case, but my expectation, and that of the adviser fraternity, is the banks’ talk needs to be matched with action.

“We need to see some better turnaround times being delivered through the initiatives the banks say they are putting in place.”

Longer processing times by banks is definitely a volume play, Martin says. Although it's not necessarily busy in terms of buy sell activity there is a significant refinance market and the banks have been competitive around interest rates and cash contribution offers, he says.

In a double-edged sword, the longer processing times have also led, to a degree, to advisers looking for offers from multiple banks in some scenarios.

“Because advisers have perhaps had less comfort or confidence in a customer's main bank returning a response in an acceptable timeframe that has prompted them to seek offers elsewhere which, of course, just adds more applications to bank queues and has a flow on effect on turnaround times.”

The issue is not new. As recently as 2021-2022 during the pandemic and a heightened level of market activity, the banks were struggling with turnaround times. “Most banks were 10 or 12 days plus that was also just a factor of volumes. All banks were in the same position at the same time.”

Banks’ recent touting of a 24-hour turnaround for clients going to their branches direct has become a major issue for advisers.  

Martin says normally it's not a problem when advisers are experiencing acceptable turnaround times. The discrepancy between the turnaround times in banks’ proprietary channels and the adviser channel is often not too dissimilar.

“Where advisors feel a little aggrieved now is that when banks’ turnaround times have lengthened, they are out on their digital channels and other media promoting the fact that some can offer a 24-hour turnaround if customers go to them direct.

“That understandably is not really a channel neutral approach. It's the customer's choice in terms of which channel they ultimately want to settle with. There shouldn't be a difference in the outcome for the customer depending on the channel they've elected.”

That's the message Martin says he takes to the banks whenever he sees a lack of channel neutrality coming through. “Otherwise, we'd have to raise it through other means.”

He is optimistic bank turnaround times will be nearer the expected three-to-five-day span in the new year, given the amount of investment and attention being given to the issue right across the major banks. 

Several banks have had approval for new staff to come into the broker channel. As they are well progressed in terms of addressing the capacity issue, Martin says he expects to see an improvement around turnaround times in the new year.

Most banks want to hold and grow their market share in home loans. “That's why I'm hearing similar remarks from banks across the board around awareness of the issue, and they are working behind the scenes to address it as quickly as possible because they're acutely aware of the flow on effect to overall market share if they don't get it right,” Martin says.