There are three certainties in life…death, taxes and major banks reporting record profit just about every quarter.
But as borrowing becomes tougher for owner-occupiers and investors, lending is also more challenging and if banks want to keep those profits coming, they need to offer deals and features that will set them apart from the ever-growing competition.
There are so many lenders in the marketplace these days catering to different types of borrowers and their needs, any banks who aren’t up to scratch will struggle to get market share.
Need for speed in 2023
One of the key focuses for many of the banks this year is likely to be around speed.
Especially after some were caught out during the Covid borrowing boom with outdated approval processes that led to long delays in loans being approved and even a number of customers missing their property settlement dates.
This year there will be a race to digital for all banks to make the home loan application process faster, especially for the great crowds of dissatisfied people out there who have been hit by rising rates and would love to refinance but are deterred by the hassle of the whole process.
Banks know that if they can win the user experience battle, they will win a large market share of those refinancers.
What’s new for borrowers?
There are already a number of digital disruptors in the lending space, such as Tic Toc, 86,400 (which has been acquired by NAB) and a host of others.
What they have achieved in a short time has made the big four banks realise they need to join the party or be consigned to the lending stone age.
Last year the Commonwealth bank launched ‘Unloan’, which aims for home loan approvals in less than 10 mins. Westpac is developing something similar. This trend is a big win for borrowers who are looking for something far more streamlined than the old “print, sign, scan, send, wait X amount of business days and sit there wondering whether the application has even been looked at yet”.
New features and products
Here’s a quick rundown of what the major banks are offering this year.
Unloan (CBA)- Currently available for refinancers, applications can take just 10 minutes. This can take longer if you go through a broker, which most savvy borrowers would be doing.
Flexi First Option (Westpac)- Unconditional approval in as little as 10 minutes for select customers who are refinancing.
Simple Home Loan (NAB)- Unconditional approval in as little as 15 minutes for select customers. NAB will give 50% of customers a same-day approval, with 30% unconditionally approved in less than an hour.
ANZ Plus (ANZ)- This app offering launches this year with features such as OneTwo Home Loans, which conducts application processes and can sometimes approve loans on a Zoom call.
Macquarie Bank- Credit assessment performed within 2 hours, formal approval within one day for select customers.
ING- Unconditional approval within two days.
The fix is in for rate cliff
One of the things talked about a lot this year is the fixed rate cliff- which describes the time during this year when a whole lot of home loans will roll out of very generous fixed rate repayments and into a variable rate more than twice as high as they are currently paying.
In fact, $99 billion worth of mortgages are coming off a fixed rate in the second half of the year from CBA and Westpac alone.
While that will be prime time for refinancing, borrowers have options available to them now that can help manage the damage when that occurs. The obvious thing to do is to make extra repayments.
For some time now, competition has meant that banks will allow fixed rate borrowers to make extra repayments.
CBA allows an extra $10,000 in repayments each year; Westpac allows $30,000 extra per fixed rate term; NAB allows $20,000 per fixed rate term and ANZ allows 5% of the loan balance or $5000 per year (whichever is less).
Reach out to Zinger
There is a lot of complex information out there in the market to digest at the moment and while all these products sound great, they may not suit your personal situation or facilitate your long term strategy to hit your goals.
If you want to know more about how it all works, reach out to a Zinger Finance Mortgage Broker who can help you cut through the noise and make the right financial decisions.