Chief adviser and 2024 Elite Woman reflects on the year ahead, client pain points and success strategies
As we look ahead to 2024, it's becoming increasingly clear that it's going to be a significant year for mortgage advisers in New Zealand. At the heart of this anticipation is Poonam Kumar, director and chief adviser at iXCEL Financial Solutions, who was named an NZ Adviser Elite Woman in 2024.
With an extensive background in banking that spans over 11 years, Kumar transitioned into the mortgage advising sector in 2020, a time marked by considerable changes due to the aftermath of the COVID-19 pandemic. She anticipates a notable influx of clients seeking dependable financial guidance in the upcoming months.
Kumar has pinpointed the current buzz surrounding interest rates and the Official Cash Rate (OCR) as critical, especially considering the sharp increases the OCR has seen in the last two years. She tells NZ Adviser: “When I came into the mortgage adviser role, the OCR had dropped rapidly and interest rates were as low as 2.19%. Almost three years later, and that’s gone up to 7% and higher.”
She identified one of the foremost challenges clients face today involves navigating decisions around interest rates and loan structuring. However, she noted a positive trend with banks beginning to reduce their 1 to 5 years interest rate terms.
Kumar has observed a strategic shift among clients towards opting for shorter loan terms, often up to 18 months, particularly among those with larger loans (splitting loan structures) and first-home buyers. This preference, she suggests, stems from a desire to minimize the risk associated with potential rate hikes as opposed to dealing with hefty break costs. Clients are locking in shorter term with anticipation that interest rates will gradually drop and normalise over the next 12 months. This is backed up by OCR staying unchanged over the last few announcements with forecast for future drops. Further supported by drop in interest rates gradually since December 2023.
Yet, Kumar pointed out a critical obstacle now confronting many is the elevated bank test rate, which has risen sharply compared to three years ago. She explains: “When I entered the market, the test rate was around c5.7% - that’s now increased to around 8.95%.” This increase, she noted, has significantly impacted clients borrowing capacity.
In response to these challenges, Kumar emphasized the importance of exploring loan splitting and offset loan facilities as a strategy to mitigate high interest rate environment. “We try to structure the loan to ease the pinch as much as we can until the rates normalize,” she states, offering a glimpse into her approach to navigating these turbulent times.
Furthermore, Kumar highlighted a silver lining with the easing of bank policy criteria, marking a departure from the stringent CCCFA requirements and providing a boost to the first home buyer market.
For Kumar, the key to success in the mortgage advising landscape is straightforward: Putting your client's best interests at heart. She emphasized: “If you do that, everything else will follow,” underscoring the importance of understanding and addressing the unique needs and goals of each client. Kumar’s approach, rooted in building strong relationships and maintaining integrity and honesty, has not only garnered her recognition but also positioned her as a trusted adviser in an ever-evolving industry.
To learn more, visit www.ixcel.co.nz
