Record number of home loan applications and 'panic buying' puts pressure on banks

Banks have been flooded with a record number of loan applications. Photo / Getty Images

Some buyers desperate to get on the property ladder are offering $20,000 to $30,000 more than the asking price and a record jump in loan applications has caused bottlenecks with the banks.

Mortgage brokers say delays in getting loans processed was ''frustrating'' and the ''boom shows no sign of abating''.

But many of the major banks told NZME despite the increase in applications - which in one case were up 7 per cent in the past six months compared to the same time last year - more staff had been deployed to speed up the process.

Chris Rapson, owner of Rapson Loans and Finance. Photo / File

Chris Rapson, owner of Rapson Loans and Finance said it was flat out and it was taking twice as long to get loans processed.

The situation was frustrating, he said, and many clients and real estate agents were getting disappointed.

In his view the banks weren't putting in the resources.

''I don't think they believe this boom is going to last but there is no sign of it abating.''

The historically low interest rates meant buying was cheaper than renting, he said.

Ownit Rotorua manager and registered financial adviser Hayley Hubbard said some loan applications that would normally take five days ''are taking 10 days just to get looked at''.

''So there is definitely a longer turnaround time.''

But Hubbard acknowledged the banks were working towards lowering application times and some had succeeded..

The requirements for home loans had also become harder and she knew of one or two brokers who had lodged applications with more than one bank, which could clog up the system.

She said some clients had also opted to offer $20,000 to $30,000 more than the asking price because of the conditions they needed to add to the application.

"They are scared they will miss out. So in my view there is a lot of panic buying happening at the moment.

''You have got first home buyers who are freaking out who want this house who are competing with developers who potentially have the money and are going in with the cash.''

Meanwhile, the low interest rates combined with expats returning from overseas added ''to the franticness of people trying to buy in this market''.

Simon Anderson, managing director of Realty Group Ltd, which owns Bayleys and Eves. Photo / File

Simon Anderson, managing director of Realty Group Ltd, which owns Bayleys and Eves, said it was now putting in a 15 working days finance clause compared to five or 10 ''because we know the process is going to take longer''.

''The banks are looking for more information and checking credit ratings, the ability to repay and security. ''

He said the banks were being responsible but the delay was causing problems especially if the buyer was going to auction or under pressure because of multiple offers on the property.

''If you don't have the finance ready then obviously it makes it very difficult.''

Anderson said property had become attractive partly because of Covid as people wanted security and those people were making decisions based around the competition.

Typically in Tauranga and Rotorua not just one person was trying to buy one house so buyers needed a fighting fund.

''So if you get competitive you may need to be able to offer more. For example if you offer $20,000 more at 2.2 per cent that is $440 per annum.''

''If you have missed out on two or three homes you are going to want the next one... so the low interest rates are creating that peace of mind for people to probably extend beyond what they thought they would go to.''

But Anderson believed the growth the property market had experienced in the last quarter was not sustainable.

''That will ease up over time as buyers hit the level when they go, no, and some of these LVR restrictions come in. So it won't be a solid sustainable level of capital growth.''

Kiwibank Borrowing and Investments manager Richie McLay. Photo / Supplied

Kiwibank borrowing and investments manager Richie McLay said application volumes in the past six months are up 7 per cent on the year before.

"First-home buyers and investors have been key drivers behind application volumes. The buoyancy in the housing market is also driving multiple-offer situations where buyers are submitting more than one loan application to their lender over a longer period.''

A Westpac NZ spokesperson said it was redeploying staff to help manage the high volume of mortgage applications.

''Our turnaround times are within five days, depending on the settlement date and other individual factors, and we continue to review our processes to improve the experience for our customers."

ANZ was also seeing record high demand for home loans, which has created "capacity challenges".

''We know that home buyers need certainty about their home loan as quickly as possible and as such we've made some changes internally to help manage the increase in demand. As a result, we've seen home loan application turnaround times reduce, with the majority of mortgage broker applications being processed within five days.''

Heartland Bank chief executive Chris Flood. Photo / File

Heartland Bank chief executive Chris Flood said the bank was relatively new to the home loans market but there had certainly been strong interest from the Bay of Plenty.

The region's share of Heartland Home Loan applications had increased by 4.5 per cent since March/April last year.

Heartland's application process was done online.

Meanwhile, competition in the home loan market stepped up a notch again last week when ANZ moved to match rival Westpac's 2.29 per cent on a one-year fixed-term mortgage alongside BNZ.

The rate is the lowest for the major banks but other banks are still cheaper.

Heartland Bank is still the cheapest with 1.99 per cent fixed over one year.

Read More

• Mortgage lending recovers, banks remain ultra-cautious - NZ Herald
• 'Buyers frantic, banks tough' - new survey reveals what's really going on with mortgages - NZ H...
• ANZ to increase investor property loan deposit to 30pc - NZ Herald
• Reserve Bank's funding for lending scheme starts next week - NZ Herald