NSW: 2022: Loan Pre-Approval and Approval Times

Hi Everyone,

What are current experiences around loan pre-approval and un-conditional loan approval times in NSW?

For example, for one of big 4 lenders, I have been informed that time to get pre-approval is currently 15 business days through broker channel.

My pre-approval application was submitted on 31 May through my broker. I am still awaiting response (today 16 June).

Today I contacted the bank directly. On direct channel, they mentioned 1 - 7 business days for pre-approval. Is this difference between broker channel and direct applicants normal?

Furthermore, they mentioned 2-5 weeks for un-conditional loan approval after the signing of contract. But in NSW, we have 5 days standard cooling-off period. What buyers do to get the loan approval confirmation within the 5 days cooling-off period?

 

that would be unusual - for both. Which lender?

 

St George in my case

 

Slower than the average lender!

 

Generally towards the end of financial year is always more busy, but the market has slowed down a little so it might not be as bad.

St George might be taking longer cause there are 2 queues, a pre approval queue and NOW business queue.

Also in addition, they are increasing their assessment rate by 0.5% on the 21st, any pre approvals assessed before then will need to be reassessed on the higher rate

 

St George have different turnaround times for different types of brokers and also depending on the application type.

Pre approval applications that are PAYG are taking 17 business days and self employed are taking 20 business days.

Top tier brokers have quicker turnaround times.

What is the reason the broker has used St George in the first place?

 

Reasoning behind St George decision was utilizing maximum borrowing capacity while using their $1 LMI for <= 85% LVR. Though, I never realized that approval turn-around time can be a criteria to lookout for. For pre-approval, I am comfortable with time, but what is now concerning me is if they also take long time during un-conditional approval after signing the contract. For NSW, the cooling-off period is all we have to take decision.

 

From my understanding, they don't do pre approvals for this product.

It's approved with LMI at a higher LVR l, then it can be changed once you've found a property.

 

Got you. Their Conditional to Formal process is quite good. The broker can order upfront valuations once the COS is signed - just ensure that the settlement period is the minimum standard 6 weeks. If you can get slightly longer than that then great (no harm asking).

 

Certain banks have different turn-around times for Pre-approval applications as well as broker accreditation status with that particular bank.

Which Bank did you do the pre-approval with?

 

St George

 

Update around my pre-approval. Today my broker informed me that my pre-approval application is expected to be picked by next Wednesday. It will be 20 days after application submission. He cited that St George are prioritizing loan and refinancing applications, and currently pre-approval time stand around 19 days.

He also mentioned to me that since my product is $1 LMI LVR ≥ 85%, it's under high risk assessment and if my purchase value is different from approved loan amount then it will trigger reassessment on unconditional approval even if I consume less than the approved amount.

With all the time taken for pre-approval and being in high risk category, I am developing an opinion that I would have been better off putting an unconditional loan application once I have decided about the property (Given I have the borrowing assessment with me around what I can successfully borrow).

What are other experiences around last three months mortgage approvals? Is 5 days cooling off period enough to get bank consent? Are 42 days have been enough for settlement?

 

Its definitely a good thing to ascertain a credit assessed pre approval - so you have done the right thing. If there are any issues with your file you can weed out these issues now rather than facing the deadlines of settlement. 5 day cooling off period would most likely not be enough time and that is the standard in the contract so I would request for a 10 day cooling off period. This is fine and normal in NSW. A 42 day settlement is fine with St George.

Just make sure you run the proposed properties you are looking to purchase via your broker so he/she can ensure it fits the bank's credit policy.

 

You're getting LMI at 85% for a dollar. This is probably why St George was recommended. It's also one of the reasons why there is significant demand with St George and their turnaround times are so terrible.

Also worth mentioning that lenders know that a significant portion of pre-approvals are never acted on. From the lender's perspective this is a cost that doesn't pay off, so pre-approvals are de-prioretised over full applications. Quite a few lenders aren't even accepting pre-approval applications at the moment.

There's nothing stoping you from making an offer with a finance clause. Whilst telling the agent does make your offer a bit stronger, there's nothing that says you must have a pre-approval. Given the market is shifting in many locations I expect agents will be a little more flexible in the coming months.

 

Varies from Lender to lender, had some loans approved in 1 day, others about a week at the longest ( I never use St George as I've always had terrible experiences with them and their offerings are not the most suitable for my clients)

Could be, again, depends on the lender.

Absolutely, plenty of time for settlement in 42 days.

Pre-approvals are good for Auction purchases, never really use them otherwise.

 

Most other lenders are super quick. I don't touch the dragon unless it is absolutely necessary or my clients insist. They've only recently recommenced fully assessing preapprovals so they are likely overwhelmed.

 

Thank you everyone for taking time to provide valuable feedback. For future reference, are there any preferred lenders that I should keep in my preference list when comparing and deciding products. In past, I always preferred big 4 products giving me maximum borrowing power with competitive variable rates.

 

There isn't preferred lenders as such but there are certainly lenders that have a larger range of policies than are better than other lenders.

Its better to work off your broker's recommendation but its also important from him/her to explain the why - why you are using this lender now and how it impacts what you want to do in the future.

 

Big 4 aren't the best if you're looking for maximum borrowing power, smaller lenders are much more generous than the Big 4
I suggest keeping a good mortgage broker on board for they will be able to advise on the most suitable lenders for your situation at the time of application, lender policies change all the time so what's best today might not be best next week.

 

Thank you again everyone for getting time out to respond to this thread. It do helped me a lot. I received my pre-approval on 27 June.

Now I am facing another dilemma and probably its with everyone like me. When I applied for loan pre-approval on 31 May, my borrowing capacity was A. June rate rise, my borrowing capacity reduced by 40k to B. Now with July rate rise, it will be reduced by 35k to C.

Though the property market is still using the comparable sales which still make use of peak 2021 sales prices as reference.

How others are dealing with this situation?

Does pre-approval has any benefit with rising interest rates when the pre-approved borrowing capacity is not guaranteed for the 90 days pre-approval period?

And that too when pre-approval period starts when the application got submitted and took almost a month leaving you with only 60 days. And then we are supposed to sign contract certain days ahead of pre-approval expiry to use it.