Speed is king as mortgage lenders vie for impatient borrowers

Technology is the key battleground in the housing market as price rises fuel demand for fast turnaround times in lending.

Nimbler and technologically savvy lenders are approving loans within days. Picture: AAP

Sharp house price rises and solid mortgage and refinancing demand are creating a “significant deviation” between lender turnaround times as technology becomes a key battleground, CoreLogic says.

CoreLogic’s product, data and analytics executive Tim Jenner said some lenders were removing “friction” from the application process, while others were grappling with systems challenges causing ongoing blow outs in approval times.

“You’ve really seen a perfect storm,” he said.

“With the onset of Covid there’s obviously been a massive (digital) acceleration and those that are swimming with their costumes off – you’ll see everything they’re wearing when the tide goes down.”

Mr Jenner said the nimbler and technologically savvy lenders were approving loans within a few days, but at the other end lenders were dealing with bottlenecks that were causing multi-week delays in property settlements.

He noted that since June 30, and against the backdrop of Covid-19 lockdowns across several states, the property data group had seen a slight slowdown in valuations for property purchases but they were still in line with this time in 2020.

For refinance-related transactions, property valuations were still “significantly above” a year ago, and mortgage customers were increasingly switching as they looked to take advantage of historically low interest rates, Mr Jenner said.

CoreLogic saw a 23 per cent surge in valuations ordered in the 12 months to June 30, with almost half by banks and lenders, reflecting digital valuations via an automated model and desktop valuations.

Mr Jenner said aerial mapping, hazard, planning and development data and timely sales figures were being used to make digital and desktop valuations faster and more accurate.

“The most critical thing and the hardest thing in this market, when it’s moving so quickly, is the timeliness between a transaction and that transaction being available for the valuer to use within their valuation report,” he said.

NAB home ownership executive Andy Kerr.

Mr Jenner said across the mortgage industry most players were seeking to automate processes and better engage with customers.

CoreLogic data shows house values up 14.1 per cent over the first seven months of 2021.

In the mortgage market, ANZ continues to be plagued by processing issues that have dented its growth, while Westpac has rectified some of its problems and is now growing in line with industry rates. All of the major banks have also been in the firing line for dragging out the discharging of mortgage customers who are refinancing to other lenders.

National Australia Bank’s home ownership executive Andy Kerr said as house prices continued to rise borrowers were looking for quicker bank decisions.

“Customers, particularly in a hot market, want things to be easy, fast and certain,” he added.

“What has changed is a lot more players have invested and ultimately the bar has been raised in terms of customer expectations, and in the last 12 to 18 months we’ve really started to solve some of those problems at scale for our customers.”

Mr Kerr said NAB had implemented “policy, process and tactical” changes and boosted technology investment to streamline processes and draw on more data to give borrowers quicker answers.

It has rolled out its simple home loan system to about 80 per cent of branch and video-based lending, and will introduce it for mortgage brokers from the final months of 2021 over 12 months.

Mr Kerr said 20 per cent of loans going through the simple system were unconditionally approved while customers sat with their banker, with a further 40 per cent unconditionally approved on the same day.

The big banks are starting to fight back as technology giants and smaller lenders eye their dominant market shares.

Commonwealth Bank is introducing a direct to consumer mortgage, called Unloan, to focus on faster approval and servicing.

Westpac has about 300 unattended desktop robots across its business, including the mortgage division, that assist with basic processing and tasks.

During the first wave of Covid-19 last year, the robots were helping with loan repayment pauses offered to customers as interactions swelled.

But the large banks – often hobbled by legacy systems – are up against fintech lenders exploiting technology.

Tic:Toc founder Anthony Baum said the industry was splintering in areas such as brand, technology and balance sheet, and younger borrowers were demanding more efficient loan processes.

“The fastest we’ve approved a home loan from dual applications – starting their application to having their loan documentation in their inbox – is under an hour, and that is six minutes of human effort internally,” he added.

Tic:Toc, which is backed and funded by Bendigo and Adelaide Bank, expects the 3-6 per cent digital loan penetration in Australia to approach the 33 per cent of the US over the next five years.

“That’s a lot of (digital loan) growth to occur through that per­iod and it will cause a fundamental change in industry construct,” Mr Baum said, noting brokers may become more relevant for complex loans.

Tic:Toc has developed proprietary technology that is also used by other lenders and banks.

NAB’s Mr Kerr said when house prices were rising customers faced a “real problem” around being able to borrow the right amount to afford their desired property.

“A key part of that is the ­property valuation itself, so speed but also accuracy is key,” Mr Kerr said

NAB recently acquired new bank 86 400 to step up its digital loan focus.