White lies & lofty expectations: demand for rapid mortgage approvals unmet, consumer survey reveals

Mortgage Application Delays Experian

Three out four Australian consumers expect home loan applications to be processed within just three days, with more than half anticipating a 24-hour turnaround, a new survey has revealed.

Credit reporting company Experian, in a poll of 1,000 Australian consumers, revealed that application processing times for home loans and credit cards are taking considerably longer than consumers expect.

At least half of those surveyed expect home loans to be processed and approved within 24 hours, with more than one in 10 expecting instant approval.

Only a quarter (26 per cent) were prepared to wait more than a week.

Home loan application wait times have reportedly blown out in some cases to more than two months, as lenders face a surge of new applications in the midst of a local housing boom.

Consumers appeared even more demanding of credit card companies, with just 23 per cent prepared to wait more than two days for approval.

Experian general manager of decision analytics A/NZ, Mathew Demetriou, noted that these expectations may be attributed to a certain degree of “consumer misunderstanding” around the mechanics of the approval process, which demand ever “more stringent due diligence” from lenders, particularly for products with higher credit limits.

Speaking with FST Media, Demetriou said consumer expectations for rapid turnaround times have increased over last several years, and more so since the onset of the Covid pandemic, “[propelling] business to look for ways of interacting with consumers quickly and via more digital means”.

“[Consumers] are more conscious of their time and are seeking convenience when applying for credit,” he said.

“By streamlining processes, decisions can be made much faster, with lenders achieving home loan approvals within 24 hours in some cases (for an existing customer earning regular income).”

The report found that lower credit limit products do generally receive instant approval in line with consumer expectations.

Instant approvals are also assumed for those applying for a BNPL plan, utility or telco product – a factor that may shape customer expectations for other higher credit lending products, including mortgages.

The emergence of neobank and other digital-only lenders (with claims by Volt Bank to have compressed unconditional loan approval times to under 12 minutes) has no doubt shifted the bar for consumer tolerances.

“Digital lenders are extremely focused on streamlining processes to provide customers with the most efficient and convenient customer journey they possibly can,” Demetriou said.

“Traditional lenders are also making significant improvements in this space, but the competition is certainly ramping up.”

Whilst acknowledging the “significant progress” made by traditional lenders to “[remove] bottlenecks and inefficiencies”, he said an abundance of “outdated manual processes” are increasing inefficiencies and thus delays in loan processing.

Adding to this, Demetriou said, over the last year “the sheer volume of home loan applications (driven by the booming residential property market and low interest rates), coupled with disruptions to offshore processing centres, has also added to increased loan processing times in some cases.”

“Being able to quickly access, aggregate and accurately verify multiple data points to drive an automated decision is key to providing consumers with a fast and seamless journey.”

A mismatch between customer expectations and messaging by lenders may also contribute to consumer expectations being unmet.

The survey found that consumer knowledge of how credit and loan companies assess applications remains limited, with 72 per cent claiming to have little or no understanding of the assessment process for home loans, while 64 per cent lack understanding of the personal loan processing.

More than 50 per cent expect traditional lenders to have a majority, if not all, of their application assessment processes automated.

For neo-lenders and buy now, pay later (BNPL) outfits, this jumped to around 75 per cent.

“Digitising decisioning processes can give lenders the upper hand over their competitors,” Demetriou said.

“Our research proves that people want the comfort and convenience of applying for credit when and where it suits them, with most people choosing lenders that offer them an entirely digital process online, including a digital identification check.”

“Then, applying automation, data, and analytics within decisioning can improve speed of approval and due diligence.

“This, in turn, not only enhances customer experience but also ensures responsible lending obligations are met, helping reduce the risk of defaults and the likelihood of hardship,” he added.

“Lenders need to be able to access data easily and quickly to make better decisions for their customers. By automating decisioning and removing bottlenecks, lenders can focus on enhancing the customer experience and providing consumers with the right product for them while also meeting consumer expectations of a fast decision.”

Can lenders handle the truth?

The research also showed that around one in five Australians admit to telling white lies on their credit applications, with many fearing they would be unfairly judged or that the truth would hinder their chances for credit approval.

The most common white lies, or mistruths, Australians confessed to when lodging credit applications were understating living costs (41 per cent) or existing debts (30 per cent), or overstating their income (21 per cent).

More than a quarter of those surveyed chose not to disclose upcoming job changes (28 per cent), with at least one in 10 failing to declare they were expecting a child.

This bending of the truth was most evident in credit card (44 per cent) or personal loan (38 per cent) applications, while a quarter of home loan and BNPL applications could also hold inaccurate information, according to the research findings.

“The fact that one-fifth of Australians could be withholding information presents challenges for lenders within responsible lending practices,” Demetriou said.

“Without an accurate picture of a customer’s finances, lenders cannot be sure they are providing credit that is appropriate for that individual.”

He said it was important that lenders perform “comprehensive due diligence when providing credit to consumers”.

“Lenders need to ensure they have assessed each customer appropriately and are abiding by responsible lending guidelines.

“Technology’s role is to support and enable the business to carry out these critical checks more easily, accurately and effectively.”

The research also showed that one in five consumers believe it is the credit provider’s sole responsibility to give someone a line of credit within their means, with less than a third believing it is up to the individual to know what they can afford.

A further third considered that it was both parties’ responsibility, but with more onus on the credit provider.

Demetriou said it was vital for lenders to leverage internal, credit bureau and third-party data “to ensure they are validating information appropriately and making the most responsible lending decisions for their customers”.