‘Confusing’ mortgage process affecting home purchases
Nearly 70 per cent of Australians have experienced a challenge in the home loan process, with more than a quarter saying they are delaying buying a home because of it, new research has found.
2,079 Australians surveyed between 28 June and 7 July 2019, 70 per cent of respondents described the home loan application process negatively.
More than two-thirds (68 per cent) of Australians stated that they had experienced a challenge whilst trying to get a home loan, with more than half (53 per cent) citing challenges relating to the application process itself.
Issues with the process included “a long, tedious process”, “too much red tape/paperwork” and “feeling unsure of which home loan was suitable”.
Opaque pricing, time to approval, and length of time to send or receive documentation were also commonly cited challenges faced by mortgagors as were problems relating to seeing or contacting a representative from the financial institutions for their home loan (22 per cent). Moreover, just under a fifth said they “never knew where they stood”.
Overall, 40 per cent of respondents said the home loan application process was “stressful”, 30 per cent said it was “a waiting game”, 28 per cent believed it to be “overwhelming”, while just under a quarter (24 per cent) found it “confusing”.
Respondents also said they found it difficult, “seemingly endless”, painstaking and “rigid”, leading to feelings of anxiety, apprehension and worry.
In comparison, just 34 per cent of respondents believe the process to be positive.
Buyers delaying home purchases
The survey found that, despite the RBA cutting the official cash rate to a new record low in June and given softening house prices, 29 per cent of Australians are delaying a home loan purchase because of the home loan process.
More than half (55 per cent) of young adults (Gen Z) said they had put off home buying because the home loan application process is daunting, compared to one in 10 Baby Boomers.
Moreover, 69 per cent of home owners stated that while they knew they should review their refinancing options, it just seemed too hard.
Mortgage ‘myths’ compounding the problem
Notably, more than half (58 per cent) of experienced home buyers said they were still not sure as to what documents banks need to assess during the home loan application process – with 47 per cent of respondents believing that banks needed to check tax returns during the process.
The issue seems to be compounded by misinformation and “mortgage myths”, the report found.
Sixteen per cent of respondents said they had received strange or quirky advice from someone about applying for home loans, with half (52 per cent) of the myths relating to the size of the deposit needed. Some respondents said they had been told that they did not need a deposit to get a loan, while a third (33 per cent) said they had been told they needed a 20 per cent deposit, and others outlined that they had been told they needed a 50 per cent deposit.
Other “myths” included being told that “fixed interest loans don’t exist”, “you can only get a home loan direct from a bank” and “women are high risk for home loans because they tend to get pregnant”.
Interestingly, while more than half of Australians state they have received home loan advice from friends and family, only 37 per cent said they trusted it (compared to 44 per cent for third-party professionals).
Just under half of respondents (47 per cent) said they were confident in their ability to get a home loan, while a third of those that had been through the process before said that they were not confident in their ability to get a home loan now.
The last two years have brought sweeping changes to regulations around lending, making it more important to talk to an expert.
“A broker can help guide you through the application process and are across the constant change in regulations and lender policies.”