We were wondering how the property and mortgage market was going during COVID-19. So we asked our intern to interview her father, who runs a popular mortgage broker and financial advisory business on Auckland’s North Shore.
Richard Piechazek is an independent financial adviser and mortgage broker at AI Financial Services. He’s focused on building long-term relationships with clients and lenders to provide mortgage and risk-insurance products.
I have seen Richard dedicate his life to helping people with their financial needs. I know so much about him because I am his daughter. And I have seen first-hand the commitment he has for his clients. Spending weekends and long hours at work to get the desired outcome for all parties involved.
Richard Piechazek joins me today for an exclusive interview. He give you some insight into who he is and how he got there. He’ll also answer some frequently asked questions regarding the property market.
How long have you been operating as a mortgage broker?
It is coming up to 21 years in New Zealand.
Back in South Africa, I was an engineer. Due to the economic situation, I was forced study further part-time in the financial world. That was when I finished my master’s in finance. I also had the opportunity to perform oversight in fund management.
What motivated you to become a mortgage broker?
My first love is still engineering. Creating something that does not exist. In South Africa, I was a civil engineer looking after big projects. Coming here to NZ in the late ‘90s, there were not a lot of work opportunities as an engineer.
When I had my third interview for a firm, they advised me that I had to redo my three years here in NZ to be able to sign off work. Being self-employed for most my life, this forced me to look at another avenue.
So I started working with a developer/builder in Te Kauwhata, installing windows. I was helping him in the project management side as a consultant. In the process, I realised that he had trouble getting funded.
That was when I started looking at becoming a mortgage broker. I already had a background in finance. So I started approaching all the lenders.
Back in 1999, it was not a favourable time to start your own business. So I had to jump through a lot of hoops. I started operating as a mortgage broker at night, while continuing my work as a consultant during the day.
As business picked up, I started focusing on being a mortgage broker full-time.
I have never looked back.
How relevant is it to talk a mortgage broker compared to contacting their banks directly?
If you go to the banks, you will only be subjected to their products and offers. You will not be told if there is a better deal elsewhere. This means you could potentially miss out on saving yourself thousands of dollars, if not more.
However, when you talk to a mortgage broker, they will present you with the full picture. Our task is not to collect mortgage orders and take them to the bank. Our goal is to provide well-rounded financial advice to benefit you in the long-term.
It does, however, depend on the experience of the mortgage broker. They need to be able to provide all the options. Every client is unique. So you need to sit down with a client, find out their financial position and needs.
Going forward, you have to create a plan for the client — the next year, five years, 10 years, 20 years, and so on. Then you should come back to that client every year to discuss if anything has changed in their situation.
That is what I enjoy. Providing a plan to the client. I meet new people, give them ideas, provide solutions, and sit back and watch them grow. It is truly rewarding work.
Have you seen much change in the time that you’ve operating as a mortgage broker?
When I first started, I experienced what I called the ‘Hong Kong Challenge’. That’s when properties were put back into the market as a lot of people came and left. This resulted in a saturated environment, and sales were slow. Back then, mortgage broking wasn’t as popular. The banks controlled most of that market.
Then came the 2007/2008 Global Financial Crisis. The market was slow again. But I was able to weather the storm and keep my business operational. This was because I had secured a strong customer base.
And now the coronavirus has arrived, shocking most of the world. This is the third big challenge in my life here.
When going through these times, the important thing is not to panic. Keep working hard; harder than usual. Each time I have faced a challenge, I have adjusted my hours and my way of work to suit the obstacles in front of me.
Today, more than 60% to 70% of new loans are now coming through mortgage brokers. This is because clients are now seeing the benefits of having someone independent. In addition, brokers are there to help the banks conduct their business. The relationship has improved between lenders and brokers.
How has COVID-19 been different?
I am based in Auckland, so with the traffic, travelling to see clients usually takes up most my day.
But the COVID-19 lockdown has changed my entire business. My focus has shifted. Now that we’re online, I can help service more customers.
Even now, it’s fascinating how I can have a client from a different part of Auckland join me in an online meeting. I can share information easily via the screen-share function. This means I do not have to go see them after a long day’s work to discuss their financial situation. I find that people just want to get home and start cooking dinner. It’s convenient for them to meet me online.
However, with COVID-19, there are some minor things that can be challenging to overcome. This would be visually seeing a client and confirming their identity, which is what is required.
We work very closely with the Financial Markets Authority and Anti-Money Laundering to figure out solutions. We trust people in NZ, but there are challenges.
With COVID-19, lenders have offered support packages for their mortgages. Have your clients taken up these offers? What is the most common help required?
To say the least, I was very busy.
We have over 2,500 active clients. We have found that we need to complete between 100 and 150 applications.
As soon as the packages were announced, This was communicated to all the clients. We are there to help. This is a time when we really need to act as mentors. We need to stand in and offer our support.
There were many different options that were discussed for each unique circumstance.
- Clients could keep the mortgage as it is.
- Clients could pay interest only.
- Or clients could apply for a mortgage holiday of up to six months.
There is a lot of monitoring. We do not want to see the cost of the mortgage increase unnecessarily.
Our main concern is this — after the six-month period is over, have our clients found work? Are they able to continue payments? This can be very stressful for those who are currently jobless.
Have you seen a slowdown in people purchasing property in NZ?
Not from where I am standing. When people see an interest rate of 3.69%, they are trying to get into the property market. They want to jump in as quickly as possible.
There is a ‘but’…
When looking at a client’s income and expenses, the banks have not changed the testing rate for their lending criteria. They still want to be sure whether a client can afford a mortgage.
Currently, the testing rate is still 6.65% to 7.5%, depending on the lender. Yes, a client may have a UMI (uncommitted monthly income) on the lower rate, but because the testing rate is a lot higher, some clients cannot afford it.
Most people that I have coming through are existing property owners wanting to buy a second house, followed by first-home buyers.
Have you seen lending requirements being affected by COVID-19?
Lenders have become stricter. They now look at affordability.
- Your test rate needs to pass. Your UMI needs to be at positive $100 to $200. Lenders will not mitigate this.
- Lenders are asking more questions around an individual’s COVID-19 situation. The industry you work in may affect your approval.
- Lenders have become very cautious. They do not want to put money into people’s hands, who might not be able to make repayments.
Banks are offering their lowest interest-rate offers ever. What do you think about this?
I like the idea of lower interest rates.
We like to give the clients a plan. Instead of paying the minimum on your mortgage, why not use this chance to pay off more? Why not increase your payments if you can?
Now is the time to reduce debt.
Doing this can reduce your mortgage by up to 12 years.
Do the banks fine you for making faster repayments?
It depends which lender you are with. As a mortgage broker, that is why sitting down with the client is important. You need to look at the lending terms.
This is what I normally do when setting up a mortgage. We usually set up a loan structure on the affordability of the clients.
If you have a fixed-rate mortgage and try to pay it off faster, the banks will penalise you. To overcome this, clients can put offset mortgages in place.
Banks such as ASB can allow extra payments of up to $1000/month. Meanwhile, ANZ do not want anything like that. For this, we would set up a revolving facility, saving extra money here.
My advice is to check your lending conditions. Set up a plan. Talk to people who can help if you are unsure.
Is there any advice you want to share with people that are looking into purchasing a home now?
Do your homework first. Talk to as many people as you can — your bank, financial advisers, real estate agents.
Look at their backgrounds. Make sure they have the expertise in the area you are looking to buy into. Ask as many questions as you can. Bring a list so nothing gets missed. Make sure you are on the same page and your needs are met.
Make sure you connect with the people you are working with, as building relationships are important.
What do you think the future for property will look like? 2021? 2022? There must surely be a lot of obstacles to overcome, post-COVID-19.
From the banking point-of-view, the lenders are asking more questions on affordability and assessing risk more diligently.
From the point-of-view of consumers and borrowers, demand is stripping. Fear has come into play. People assume that the property prices will fall. However, as yet, this has not happened.
Some places where this may happen are areas such as Dunedin and Queenstown. Being travel hubs, the tourism industry has taken a hit. Many cannot continue to afford a home, decreasing demand in these cities.
Here in Auckland, demand should stay steady. I do have concerns for some areas, such as South Auckland, because of the demographics of the market.
They mainly serve rental properties. Homeowners may want to sell. This may force a drop in prices.
Thank you for taking the time out of your day to discuss property and mortgages.
No worries, my daughter. Any time.
Contributor, Wealth Morning