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How is COVID-19 affecting lending? What does that mean for you as a borrower?

There’s no doubt that the last few months have created challenges for many of us. Entire industries are struggling, financial markets have been significantly impacted and there’s still a great deal of uncertainty on the horizon.

But lenders are still lending, right?

Yes.

And Canberrans are still buying property, right?

Yes! (Double yes!)

We’ve been helping record numbers of Canberrans buy homes and/or prepare to buy this year. With a large portion of Canberra’s population in secure, long term government employment, many families have been able to ramp up cash savings significantly in recent months. This has created a massive surge in the number of motivated buyers – especially those looking to buy their first home.

 

So, let’s look at how COVID-19 is impacting the lending environment and what it means for you as a borrower.

 

1. Your loan application may take longer to be assessed

In the initial days of COVID-19, we saw wide-spread delays with the processing of loan applications, largely because many lenders use offshore teams located in regions severely impacted.

Despite being a few months in, we’re *still* seeing delays with processing of loan applications. We’re finding that delays significantly vary between lenders and are now likely caused by:

  • Increased volume of applications due to government incentives (Hello, First Home Loan Deposit Scheme!)
  • Increased numbers of motivated buyers wanting to act now (There’s nothing like #isolife with parents/ house mates you don’t like, to help you realise it’s finally time to buy your first home)
  • New-to-the-job loan assessors, doing their best to learn quickly
  • Inevitable complications related to having a lender’s entire workforce, deployed to home ‘offices’
  • ‘Teething issues’ resulting from lenders outsourcing specific functions to third party providers (preparation of Loan Contracts for example) to help manage the increased workflow

Given the uncertainty in the broader economic climate, in addition to taking longer to review an application, once it’s picked up, the assessment process is taking longer too. Lenders have stepped up their assessment protocols and scrutinising loan applications like never before.

 

2. Your loan application may be heavily scrutinised

It’s painful. It’s a bit over-the-top. You might even feel like you’re being interrogated. There’s no question that many lenders are asking for a whole host of supporting documents they’ve never required previously. Understand that a lender will scrutinise your finances with a fine tooth comb.

Whilst we preemptively ask for all the information a lender will require upfront (because we pride ourselves on making things as easy as possible for you!), the goal posts are shifting daily.

This means that even if you provide everything.but.the.kitchen.sink when you sign your loan application, by the time your application is actually assessed by the lender (some lenders have been taking up to 3 weeks), there’s a chance the lender may exercise their discretionary powers and request additional/updated information from you.

Don’t get us wrong. Lenders still want to approve loans. Lenders still want to lend money – and it’s critical from a broader economy perspective that they do.

You just need to be aware that as a borrower, you may need to jump through a few additional hoops before you receive the call from us to say, “Congratulations! Your loan is Formally Approved.”

 

3. You need to get your finances ready sooner rather than later

If you’re planning on purchasing property soon, you should talk to someone about your options sooner rather than later. The last thing you want is to miss out on a property you love because you left the finance side of things to the last minute.

We all know it’s human nature to put things off that don’t absolutely need to be done right now. We can’t tell you how many calls we receive on a Monday from brand new clients who have fallen in love with a property that’s being sold for auction next weekend.

It’s our job to do everything we can to make the process of buying property as easy and stress free for you as possible. And in this current lending climate , our best advice is to get ready earlier than you think you need to be.

If you’re aware of the state-of-play from the outset; you’re willing to be a little patient; and you understand that we’re working around the clock to help as many buyers as we can, we’d love to help you too!  You can get started here.

 

 

 

 

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