Property contracts are at risk of falling over as the processing times to get finance are blowing out past the standard clause of 10 working days, real estate agents and mortgage brokers have told OneRoof.
They said buyers were increasingly having to ask sellers for extensions, so they could get their finance approved and carry out their due diligence.
However, the major banks denied that home loan applications were being held up. ANZ, Westpac, Kiwibank and BNZ all told OneRoof they were processing home loan approvals well within 10 working days. ASB did not respond to OneRoof’s request for comment.
To ensure customers didn’t miss out, the banks said they prioritised properties that were under contract or were due to be sold at auction.
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Harcourts agent Alex Dunn, who works in Auckland, told OneRoof that there was an issue, and sales were at risk.
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He cited as an example a deal he is involved in. He said a first-home buyer looking to buy a three-bedroom home in Papakura had been forced to ask for an extension from the vendor.
The buyer’s bank had requested they carry out a valuation of the property as a condition for pre-approval but it had only sent out the request on Friday, and the property was due to go unconditional the following Tuesday.
Dunn said that didn’t leave the buyer enough time to get the valuation, which could take up to six days to complete and process.
“It’s due to no fault of their own – just the bank.”
Dunn said last month he had to ask for about five extensions for buyers because finance approval had taken longer than expected and delayed due diligence reports.
Some vendors were happy to wait, he said, while others said no.
He had two recent cases where the buyers missed out because the vendors wouldn’t grant an extension. “If it’s a really popular property and they’ve had good numbers through the open homes, the vendors are probably not that inclined to give an extension.” Those who had a back-offer were also unable to oblige.
Mortgage Managers financial adviser Stuart Wills said the approval time varied between banks, but some were quoting up to two weeks to approve finance.
Aucklanders pass a branch of ANZ. The bank says the turnaround time for approving home loans usually takes two to four days. Photo / Fiona Goodall
However, the switch to a buyer’s market this year had put pressure on vendors to grant extensions. “Chances are fairly good buyers will get an extension at the moment, but there’s no guarantee,” he said.
Kiwi Mortgages mortgage broker Jatinder Singh said buyers were increasingly asking for an extra five or seven working days to get a deal over the line.
“It’s happening a lot,” he said.
Singh said first-home buyers who were applying through the First Home Loan scheme were vulnerable.
Firstly, the bank had to approve the application and then send it to Kāinga Ora, adding about two days to the process. Once Kāinga Ora approved it, a valuation was then needed, adding another three to six working days, and then the valuation had to be sent back to Kāinga Ora, adding yet another two days.
He said it could be “very risky” for first-home buyers who had very limited funds and shelled out about $1000 for a valuation only to miss out on the house. “Sometimes banks are quick to respond, but sometimes Kāinga Ora takes too long.”
Singh said while a buyer could increase the number of days a conditional offer was valid, the risk was that the vendor might question why it would take that long.
Kiwibank general manager for home lending Nicole Pervan said the length of time it took to process an approval varied from customer to customer and deal to deal.
Generally, the bank took around four business days to approve an application that involved a live deal and seven business days for other pre-approval applications.
An ANZ spokesperson said the turnaround time for approving home loans usually took between two and four days.
“Many customers choose to get a pre-approval prior to finding a specific property because this can provide a helpful indicator of how much they can borrow and can help speed up the approval process once they do find a property because we already have details about their income and expenses.”
A BNZ spokesperson said its in-house home loan partners could deliver a 24-hour decision on new home loan applications once it had received the required information and completed responsible lending checks.
“We are not experiencing any specific delays in processing home loan applications or meeting a 10-working-day timeframe for approvals once a sale and purchase agreement has been signed. Applications submitted through brokers may take slightly longer than those that come directly to our home loan partners, but these are also being processed within the standard timeframe.”
A Westpac spokesperson recommended customers allow seven business days for finance approval and five business days for valuations to give them some breathing space. "Westpac is working hard to help make the homebuying process as smooth and easy as possible for customers. Our current application turnaround time is between 2 and 6 days, depending on the complexity of the application and its origination channel."
Requirements around when a valuation was required varied between banks and could be requested for certain property types such as private sales, high value, leasehold, properties under construction or if the loan-to-value ratio was under 80%, which was often the case for first-home buyers.
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