BEHIND THE NUMBERS: turning around the lending market

ANZ’s home loans business has been a strong contributor to half year earnings – a pleasing result given the work that has gone into the business over the last few years.

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The most notable outcome of carefully managing the book over the March half, delivering $A5.6 billion of balance sheet growth, was regaining our position as the third largest Australian home lender, based on Australian Prudential Regulation Authority (APRA) data – while sustaining a strong margin performance.

"We listened to our lenders and customers… and focused on getting three key levers right: policy settings, time to decision, and pricing.”

ANZ’s market share at March 31 this year was 14.4 per cent and we have added 92,000 new home loan accounts since 1 October 2020.

We have seen strong growth in both the owner occupier and investor segments - demonstrating we are fundamentally a mass market home loans business and can meet a broad range of customer needs.

Equally pleasing, we have delivered strong growth in an environment of accelerating attrition as customers take advantage of the low interest rate environment to repay their loans faster, leaving more money in their offset accounts (balances in offset accounts increased $A2.7 billion half-on-half).

Helping customers repay their loans faster is desirable – and indeed core to our mission of being the best Australian bank for customers who want to buy, own and sell a home.


These results are the culmination of two and a half years of work. We listened to our lenders and customers who had been voting with their feet and taking their business elsewhere, and focused on getting three key levers right: policy settings, time to decision, and pricing.

The home loans recovery effort focused first on credit policy to ensure we were applying it consistently and clearly at all times and that our credit settings were indeed delivering the intended outcomes.

Well-intentioned conservatism had, at times, resulted in decisions taking longer than needed, slowing down the time taken to progress applications. With input from key stakeholders – our customers, lenders, brokers and assessors – we set about fixing these issues via two major programs, with the objectives of increasing approval rates and reducing re-work on applications:

  1. We conducted our first (now annual) policy survey of our lenders and brokers and went to work addressing the feedback.
  2. We completed a full rewrite of our home loan credit policy document, for the first time in a number of years, to clarify wording and increase useability.

Next we focused on simplifying assessment processes and extracting the productivity benefits from switching off our old third party origination system and moving the vast majority of applications onto the one system.

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Renewed confidence

As at September 2019 our home loan balance sheet had been declining for 13 months in a row – yet even by that date there were signs of improvement. Loan approval rates had begun to increase from historic lows, our time to decision had improved materially and we had begun to see higher application volumes, supported by the ‘Offer So Good’ campaign in partnership with Qantas. We entered 2020 with renewed confidence the market was readily considering ANZ again.

As COVID-19 advanced across the world in 2020, uncertainty and economic restrictions resulted in much lower turnover in the Australian housing market. Home lending activity very quickly shifted from predominantly property purchases to refinancing. Refinancing traditionally occupies about 25 per cent of the lending market but increased to around 50 per cent in mid-2020. In that period, we were able to approve more loans than ever during the pandemic without loosening our risk appetite.

Our credit policy settings and competitive pricing – especially on fixed rates at a time when customers were demanding greater certainty in their repayments – enabled our home loan book to grow $A16 billion (6 per cent) in the last nine months of the 2020 calendar year, resulting in a calendar year market share performance of 1.9 times aggregate system growth.

However, the high application volume brought its own challenges. Sustained higher flows in 2020 meant that while we’d almost doubled our assessment capacity, the number of new deals exceeded our regular capacity. That means our assessment service levels in recent times have not been where we need them to be.

Specifically, as at the end of April 2021, time to first decision for our brokers and mobile lenders can be split into broad categories:

  • Simple deals without Lenders Mortgage Insurance (LMI) at 12 business days;
  • simple deals with LMI at 19 business days; and
  • complex deals at closer to 30 business days or longer, depending on complexity and rework required (all based on the 90th percentile).

We acknowledge the situation is challenging and that we need to improve to meet the expectations of our customers, lenders and valued brokers, recognising we are in a buoyant property housing market with lending indicators at historic highs. We also expect the momentum in housing to continue, with ANZ’s economic team forecasting house price growth of 17 per cent in 2021.

An unfortunate turn of events is the growing COVID-19 situation in India. This may impact our efforts to reduce times to decision but it is essential we prioritise the safety of our staff members and their families in this difficult time.

Turnaround times

It is important to our organisation, as a trusted partner for our customers and lenders, that we reduce our times to decision and reduce the relative timing difference we see between channels. Our operations teams are fully committed to reducing our turnaround time and we have hired over 80 new assessors this financial year alone and are leveraging other resourcing to assist with processing activity.

We also know the only way to ensure we have robustness in our process, allowing it to flourish at times of peak volume, is automation. We are investing in all stages of our assessment processes: document collection, triage, verification and decisioning, with the outcome being higher rates of auto-decisioning in targeted segments and improvement in times to decision across the board.

The sort of impact automation can have is seen in the relative turn-around times for our broker and mobile lender originated loans (which are manually verified and assessed resulting in longer time to decision and less scalability in managing volume) compared with the ANZ branch-originated loans.

Customers who come through our branches are receiving their first decision on average within two business days (90 per cent within 6.6 business days). The difference to the broker and mobile lender deals is that two thirds of branch applications are auto-decisioned once documents are submitted, meaning customers who walk in with all the right documents can leave the branch with a decision that gives them the confidence to bid on a property.

Notwithstanding these challenges however, the turnaround and ongoing momentum in our home loan business has been one of the success stories in our half year result.

Kate Gibson is Home Owners Portfolio Lead and John Campbell is Home Loans Tribe Lead at ANZ

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