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Brokers and clients alike are continuously being frustrated by the continued lags in discharge times from certain lenders.
While long delays in loans being discharged have been an ongoing issue (and has led to the ACCC to call on government to limit discharges to 10 days), turnarounds on discharges have been blowing out again as the refinance market heats up.
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Speaking to The Adviser, Shore Financial senior credit adviser Christian Stevens said the brokerage had seen a “significant variance among lenders regarding discharge times”.
“Some wrap it up within days, while others drag their heels for weeks,” Mr Stevens said.
Mr Stevens acknowledged while this might come down to certain “operational inefficiencies”, the real reason is that “longer wait times are a tactical move to deter customers from jumping ship in a highly competitive market”.
“This gives lender retention teams the time to contact customers to get them to stay. It also means they may receive additional interest from the drawn-out discharge process,” Mr Stevens said.
“These delays are more than just a nuisance, they can derail property sales or refinances which leads to extra costs and added stress.”
He added that the “industry and regulators should consider standardising the discharge processes to prevent these bottlenecks”.
Similarly, Mortgage Choice Berwick director and owner David Thurmond said his brokerage had to go back to a customer’s existing bank and ask the lender to “sharpen their pencil as much as possible” to keep the client before they refinance.
“Let’s say a client is on 6.2 per cent, for example. The bank comes back and says they won’t give them a discount to say 6.1 per cent. But we know that other banks are going to give them 5.8 per cent or 5.75 per cent,” Mr Thurmond said.
According to Mr Thurmond, once a settlement gets booked by the online system, lenders will often contact customers and only then offer a competitive interest rate.
“It’s wasting the client’s time for the better part of a month,” Mr Thurmond said.
“They’re going through an application process only to find out that the bank will actually try and keep them to only do that when they feel threatened enough that the client is going to leave.”
He added that “from a business point of view” it makes sense that lenders delay the discharge process and that he’s had the most issues when trying to refinance a client trying to switch from one of the major banks.
“[I] understand why the banks are doing it, but they’re doing it to the detriment of their clients and in the experience the clients have,” Mr Thurmond concluded.
“The banks are doing it because [it’s their] bottom line. They don’t want to offer discounts to clients unless they absolutely have to and when they’re absolutely forced to do it, otherwise they’ll lose the business.”
An ongoing issue
Brokers have long been frustrated by the excessive time taken to refinance away clients, with both the MFAA and the FBAA taking the issue to politicians and regulators in the hopes of finding a solution.
In November 2020, the Australian Competition and Consumer Commission (ACCC) released its final Home Loan Price Inquiry report, which examined how the home loan market works and put forward potential improvements that could be made.
Among them was a recommendation that “all lenders should be subject to a maximum time limit of 10 business days to complete the discharge process.”
However, given the change in government, no action has been taken on this recommendation.
The MFAA recently reiterated that lenders should either move quickly to discharge loans or be mandated to do so.
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