Photo: RNZ
Mortgage brokers are frustrated by the "diabolical" time being taken to process home loan applications and say in some cases it's meant turning clients away.
They say bank staff are turning around direct applications to banks more quickly, which makes it hard for them to do business.
Mortgage adviser Sarah Curtis it had become common for it to take at least eight to 15 working days for an application to be processed.
She has had to refer multiple clients to the bank directly because it was the best thing for them - even though it would mean she would miss out on the commission she would normally earn for the work she had put in up to the point of submitting the approval.
"There's so much more to what we do than get an application into a bank. We're working with clients 12 to 18 months before anything even pens to paper. We've had to put all that time and effort into it in advance and then send it to the bank because we can't get it done."
She posted on social media this week that it made her wonder whether it's "all worth it".
"So I am having to tell clients we have worked with, some for months, to go to the banks directly to meet their timeframes - and 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."
She said the applications for her clients were "immaculate" and the advice she offered was worth waiting for, particularly around things like loan structure.
"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."
David Cunningham, chief executive at mortgage broking firm Squirrel, said it had emerged as an issue as the housing market became more active.
"It's nowhere near the level of the heyday. The market dropped from $100 billion per annum, to $60b and brokers were 50 percent then and now 65 percent on average - they downsized as the market went down and haven't sort of upsized."
He said banks had in the past sent broker applications to branch networks to process but there was evidence they were not all doing at that the moment.
"One of the major banks has still got good turnaround times but the rest are diabolical, it's really problematic."
He said it created a situation where clients were stressed because they could not get an answer in the timeframe that they expected. The bank staff that the advisers were chasing would also be under pressure, he said. "It's really inefficient for everyone."
What's the issue?
He said the problem was a lack of efficient processes in bank broker teams.
"Because brokers are 60 percent to 70 percent of the market, branch networks have capacity to deal with customer approaching them directly. Their broker processing teams are under-resourced.
"The broker has captured the information, they know whether it's a good deal and which bank is best for the client. Banks get that information and then reprocess it all. And if they're getting 150 deals a day instead of 100 six months ago, that's a backlog of fit and you can't magic up another 50 percent increase in staff overnight. The system doesn't flex. It's lacking in digitization."
He said people could go to a bank and see a person in the branch who could get it done faster. "It's not anticompetitive by intention but it's an outcome from the lack of resourcing for the increase in volume."
He said some banks embraced brokers as an important one to bring in new business, rather than a competing channel. "There are ones that would rather they got it through their own network. Some are reluctant users of brokers but accept that's the way the market has gone."
Cunningham said it made sense for the banks to use brokers because they were a skilled workforce who only had to be paid when they delivered. "A branch team, might be busy one year and not the next but you have to pay them the whole way through. It's an efficient model for banks."
A recent survey by Tony Alexander of mortgage advisers raised similar concerns about a "blowout" in bank application times.
One told Alexander's survey that a broker application could take 10 or more working days when a client could get an approval from the same lender directly in a day or two.
One said when buyers were often in a multi-offer situation and having to ask for 15 days to arrange finance made it hard to compete.
Most banks are not offering pre-approvals, except to existing customers.
Cunningham said it highlighted how impractical a Commerce Commission suggestion that brokers seek three offers for each client to choose from would be.
ANZ said turnaround times would vary depending on the type of application and how complex it was, as well as the overall volume of applications.
"ANZ does not favour direct channels over adviser channels and turnaround times are similar across both channels over time.
"Ensuring all necessary information is submitted upfront will help us process a customer's application as quickly as possible. We have excellent resources available to our accredited advisers to support them in determining the required information."
But at BNZ, head of home lending product James Leydon said broker applications could take longer.
"Our in-house home loan partners provide personalised service and can deliver a 24-hour decision on new home loan applications once we've received all required information and completed responsible lending checks. This is a key service commitment we make to customers who come directly to our home loan partners.
"Applications submitted through brokers may take longer …This reflects some operational differences between channels - for instance, when additional information or documentation is needed, the process of retrieving this from customers via the broker can add time to the assessment."
How much do brokers earn?
Opes Partners economist Ed McKnight said about $34.9 billion of lending over the past 12 months might have come through brokers, and a significant amount would have been paid by banks in commissions to them,
"Mortgage brokers earn between 0.55 percent to 0.85 percent of the mortgage value upfront as a commission. So if the mortgage broker helps a borrower take out a $500,000 mortgage, the company might earn $2750 to $4250.
"And then for that lower end, there is often trail commission as well of 0.15 percent of the loan's value. So if you say the commissions range between 0.7 percent to 0.85 percent, then banks would have paid approximately $240 million to $296 million over the last year in mortgage broker commissions.
"This is not exact, because we haven't accounted for the fact that if you take out a really large loan, you might go direct to the bank and use a private banker. And I haven't weighted the commissions by market share of the banks. For example, the bigger banks (ANZ and ASB) pay more commission up front and no trail. But I think it's fair to say that the amount of commission is likely over $200 million over the last year. "
He said while mortgage brokers were paid by banks, if they were not providing them with business, they would need to spend more money on marketing and processing loans.
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