National Australia Bank CEO Ross McEwan told the Home Economics Committee on Friday that NAB could greenlight a “vanilla” home loan in as little as 24 hours.
“For a simple home loan, via one of our agencies, 50% is [approved in] less than a day, and the remaining 50% less than five days,” Mr McEwan said.
The big four bank CEOs were all quizzed late last week by Liberal MP Tim Wilson, who chairs the House Economics Committee, about their ‘hour of yes’ for loan approvals mortgages, after the government’s plans to abolish responsible lending laws – to help the flow of credit – were delayed when it was unable to attract enough support for the changes in the Senate. This followed lobbying by consumer groups who feared the changes would lead to vulnerable borrowers receiving loans they could not repay.
The banks have assured the government that scrapping the laws will not open the floodgates to credit as Australian Prudential Regulation Authority lending standards will continue to require tough approval standards.
The banks acknowledged that having a domain-focused regulator would help them at the margin, noting that the proposed responsible lending changes would simplify application processes for customers.
However, documents presented to the Economics Committee last week show that banks are making significant progress in overcoming ASIC bureaucracy regardless, by investing in their own systems and removing inefficient processes that were slowing them down.
Mr McEwan said NAB had introduced a streamlined home loan process over the past six months which has reduced the number of bankers processing the loan, shortening the time customers wait for approval.
The speed of approval times at some lenders swelled to more than a month at worst in 2019, as banks became cautious about vetting spending following the ‘wagyu and shiraz’ case that the Corporate regulator sued Westpac, which the bank ultimately won.
Investors will be looking at the system improvements when Westpac, ANZ and NAB release their financial results for the first half of their fiscal years in the first week of May.
ANZ Bank has been hit with a ‘double whammy’ as it grapples with a systems upgrade that consolidated multiple platforms into one as it took a more cautious stance, leading the bank to yield an astonishing 0.75% market share in just 12 months.
ANZ chief Shayne Elliott said on Friday the key factor driving home loan approval times was the volume of applications to the bank, revealing that at the start of the year it was inundated demand as customers sought to settle ultra-low rate loans.
This came on the heels of the Reserve Bank’s COVID-19 rate cuts that prompted banks to put record mortgage deals on the market, helping to spur an early boom in homeowner buying.
“If you’re an ANZ customer that we’ve known for a while and you walk into an ANZ branch, you’ll come out of that meeting with a ‘yes’, you’ll know that literally within an hour,” Mr. Elliott. .
However, more time would be needed to assess new clients. “If you are a new customer of the bank, and we don’t know you, and you go through a brokerage channel for example, a little more distance… if you come with all the right documents, the right pay slips and all pieces, you will usually get a response within 10 to 12 days.
On Thursday, Westpac CEO Peter King revealed the bank had made progress on turnaround times, after its approvals reached up to six weeks in some cases as the crisis descended ago a year.
Westpac suffered a major blow in March last year after it was forced to close its treatment center in Manila by Philippine authorities and returned the operation to Australia. The bank began sorting through loans that were due to settle in the next five days as it cleared a 30-day backlog of applications.
But Mr King said Westpac was now processing around 12% of mortgage applications within two days and a further 50% within 10 days. However, he also pointed to a cohort of more complex loans that took longer.
“For a quick and easy loan, i.e. PAYG, we want to do it in less than two days,” King said. “It depends on what the customers want and the type of transaction.
“More complex transactions take longer, when you get into more complex trusts or family matters it takes a little longer. I would say I want to improve that.
Responses show Westpac, ANZ and NAB closing in on key competitive advantage enjoyed by Commonwealth Bank, which gained mortgage market share over rivals in 2020, as it remains confident its approval processes can be done at once quickly and in a manner consistent with responsible lending requirements.
Mr Comyn said on Thursday that the CBA’s turnaround times remain under ‘operational pressure’, with the strongest house price performance in more than a decade triggering a corresponding 40% increase in claims home loan.
“It would be within two days. His brokerage channel would be slightly longer than that. For most of the last 18 months we wouldn’t be too far off that, maybe a few more days,” Comyn said.
Banks’ ability to make quick decisions on whether an applicant should get a loan will help support the hot property market as auction clearance rates rebounded in the March quarter.
Mr Comyn said the ABC expected national house prices to rise 10% in calendar year 2021. Mr King of Westpac said they could do the same in 2021 and 2022. ANZ’s Mr Elliot is tipping growth even faster, saying house prices on Friday could even rise by as much as 17% before Christmas.