Opes Mortgages says the BNZ, ANZ, Westpac and BNZ have turned off pre-approvals as it is taking some banks up to 20 days to approve a mortgage compared to five days normally.

What it means is unless a buyer has a live deal – the property is under contract – the banks won’t work on an approval.

Opes Mortgages managing director Peter Norris says the banks’ mortgage workloads have increased and one way to improve turnaround times is to stop pre-approvals and focus on live transactions – new purchases and refinances.

He says this happens more than bank customers think. “There are normally one or two banks which have switched off pre-approvals, but for all four to do it at the same time is rare. It’s a tool the banks often use when their mortgage approval turnaround times become stretched.”

Norris expects the switch won’t be turned on for at least a couple of months and possibly even longer. “With interest rates dropping that will mean the workload will not decline anytime soon.

“Unfortunately, when a client has a property under contract and the due diligence period is 10 days and the bank is not even picking up the mortgage application for 20 days, it causes issues.”

On the other side of the coin, Norris says it’s good for mortgage advisers dealing with buyers who have properties under contract.

Stretched further

Those approval times could be stretched further if the financial markets predictions of an RBNZ OCR cut next month ring true.

The financial markets have priced in a roughly 40% chance of a rate cut in August and have more than fully priced in a cut by the time of the October Monetary Policy Statement meeting.

In the past the RBNZ has begun easing even while inflation was outside of the target range.

These have been episodes where growth was weak, and hence there was confidence that inflation would trend significantly lower over time, Westpac’s economics team says.

“We think the RBNZ is close to meeting this threshold now, but it will be data-driven in terms of the timing of the first rate cut.”

The economists say it is important to keep in mind the RBNZ’s message in the MPR was one of “tempering restriction” as opposed to quickly removing its foot from the brake.

Upcoming labour market data will be key in determining the timing and extent of this tempering and the new forecasts in the next month’s Monetary Policy Statement will be a critical indicator of what “tempering” means to the RBNZ right now.