How have home loan applications changed during COVID-19?
Updated: Feb 13, 2021
COVID-19 and its impact on the real estate industry has been unprecedented. Many businesses have closed down or moved staff on as a result. This has caused many lenders and banks to be more cautious when assessing home loan applications. The widespread social distancing rules have also forced the industry to change how it operates and adopt technology in order to work remotely until recently when such restrictions were relaxed.
We discuss what it means to take out a home loan during a pandemic with Laurie Gardner from No Fuss Mortgage Co. Over the latter part of 2020, Laurie saw a significant drop in real estate transactions with fewer property purchases and more refinance activity. Due to the reduced demand, there are good refinancing opportunities and lower rates for homeowners. Since the pandemic, Laurie’s customer base has changed to include first home buyers and those who want to upgrade. However, there has been a significant reduction in customers looking for an investment property due to the uncertain economy.
Delays in processing
Laurie has experienced serious delays in processing loans for most major banks during this uncertain time. For example, the ANZ bank can take up to seven weeks to assess an application. This delay is caused by banking staff working from home and overseas call centres being overwhelmed due to customers seeking COVID-19 assistance. However, some lenders and banks have electronic loan documents that can be signed on a customer’s computer making the process more streamlined.
There are also a number of social distancing friendly identification options to assist home buyers. These include:
· Electronic Identification Verification
· Verification Through Video Conference
· Mailing Certified Identification
· Post Office Identification
What changes have the banks made to loan applications?
Banks have made it harder for future homeowners to secure a home loan due to the increased unemployment rate, those who have been stood down or are on JobKeeper. Laurie has noticed tighter income tests by banks to assess a customer’s personal circumstance and stability of their employment. Financial institutions are examining bank statements very closely and focusing on living expenses and any other financial commitments a customer may have to ensure that they can afford the mortgage repayments.
The banks have become more cautious and created stringent rules for customers that are working in non-essential industries. Banks have identified the following industries to be particularly risky for lending:
· Entertainment/fitness/personal trainers
· Personal transport (Ubers and taxis)
· Personal services (beauty)
· Sporting professionals etc.
Those who are self-employed need to provide regular BAS statements and ensure their accounts are kept up to date.
Tips for buyers wanting to buy property in the next six months
Laurie’s best tip for those who want to buy is to make sure you have pre-approval for a loan before putting an offer on a house. Be careful that your circumstances do not change or might change due to COVID-19 as your bank may withdraw its approval.
These unusual times have created a relatively weaker property market and many people appear to have taken for granted that property will drop. However, it’s important not to rush into buying property and save as much money as possible for a deposit. Talking to a mortgage broker about your situation is recommended.
Laurie Gardner Bio
Director, Laurie Gardner established No Fuss Mortgage Co (NFMC) in 2002. Since then, NFMC has provided clients with quality home loan solutions from a panel of over 20 lenders. These lenders provide NFMC with access to hundreds of loans and the best interest rates. Laurie has over 30 years’ experience in Finance and Management and has formal business qualifications including a Diploma of Financial Services (Finance/Mortgage Broking Management).