Now that the financial year has ticked over, our Plan Assist Mortgage Advisory Team are finding client loan applications are moving faster through the banks. Instead of 30 day approval times, we are now down to 4 days or less, which is great news for purchasers.
The only downside to this is that lenders are quicker to say “no” to loans if anything is wrong. This could be one of the most challenging years in finance and most people planning on buying property in the coming year are still yet to find that out.
Its now more important than ever to talk to a professional mortgage broker – call us on 02 9449 2333.
Surprise! Imagine being 10 days away from settlement and after a 3 month bank approval process, your bank says the “D” word – Declined!
Last week we witnessed another backflip decision from a lender, changing their minds after the client had received a “Conditional Approval”. The lender declined the application due to their income requirements changing, and the client is now exposed and not able to settle on time.
With credit policies continuously tightening, we strongly advise to hold out for an unconditional approval before committing to a purchase.
Types of Bank Approvals:
• Pre-Approval – An indication that the bank may approve, based on income information. Indicative only and it gives you an idea of what is possible.
• Conditional Approval – An assessment of all the facts and figures, and conditional to a valuation and final risk assessment.
• Unconditional Approval – a lender has looked at income, valuations, and all aspects of the loan application, and now fully commits to producing loan documents and providing funds for your purchase.
We find real estate agents are increasingly placing pressure on buyers to hurry their decision and exchange contracts. To allow for bank delays, we suggest negotiating a 3 to 4 week “finance clause“ to allow for Unconditional Approval and full lender commitment before you are legally liable to settle.
To find out more about finance clauses and avoid lender surprises, email us or call 02 9449 2333 to talk to one of our property specialists.
We are currently receiving the worst bank service in memory, from all the major banks. They have slowed the loan process down considerably, and some clients are actually missing their settlement dates and having to extend settlement periods.
The banks are placing profits before people. Approvals times of new loans have blown out by weeks, even months in some cases.
Typical time required to receive a Final Approval (in working days):
NAB 18 days
CBA 13 days
St George 12 days (was 32 days last month)
ANZ 13 days
Westpac 16 days
Why are they slowing the system down?
• Short on cash! They have to borrow from overseas and the cost has increased.
• Lending ratios too high. For every $100 in deposits, the Aust. banks lend out $155. This is one of the highest ratios in the world. The ratings agencies are threatening to reduce their rating from AA to a lower rating. This means they will have to pay more for overseas money.
• Cost cutting: Banks are sacking staff, not hiring. Less staff left to process a lot more work.
• First Home Owners have filled the banks with over 1,500 applications per week (each bank). Unprecedented.
• 30th June is historically the peak season for settlements of property.
• Interest In Advance transactions peak during June, requiring a lot of processing.
• The 5 major banks now have 92% market share of all home loans, up from 75% last year. This is due to all smaller lenders pulling out of the market due to shortage and high cost of funding in this current global credit squeeze.
In Summary,
The major banks now have a bigger market share by default, higher volumes, less profit margin, cutting staff to compensate, and receiving threats of losing their AA rating. These are all incentives to slow the system.
The result: The major banks are deliberately slowing to ride out these current market conditions. The evidence is in Approval times now taking between 4 to 8 weeks, placing our client’s settlements in danger.
To find out how your client can avoid the embarrassment of missing a settlement date, visit our website www.planassist.com.au or call 02 9449 2333 to talk to one of our mortgage specialists.