“We live in a time where people should be informed about their financial options,” Advocate Erez Perez, CEO of Perez & Cohen Mortgage, a mortgage brokerage firm, recently told The Jerusalem Post.
Perez sat down with The Post to discuss the mortgage market in Israel, the effects of the coronavirus pandemic on personal finance, and the future of real estate pricing.
“When was the last time you conducted a NIS million deal without consulting with a professional?” he said.
Yet, according to Perez, people do this every day when taking out a mortgage for their homes.
Perez, a lawyer for some 15 years began his career in commercial litigation and quickly entered the world of banking, branching out and establishing his mortgage brokerage firm with the strong belief in earning a living through helping others.
“The majority of people grow up without knowledge in economics, without knowing what ‘prime’ is, without knowing that their private bank is not the only place to receive a mortgage,” he said. “Most people compare prices when buying a new appliance, and so they should do the same when it comes to such a massive financial investment like a mortgage.”
Perez said that people need to understand that “the bank is not your friend.”
“Just because you have an account in a certain bank, does not mean you will get the best deal there,” he said. “The banks want to make as much money off of a client as possible and so sadly, most of the time the mortgage does not really match the needs of the client.”
As such, Perez’s firm specializes in negotiating the best possible terms for their clients vis-à-vis the banks.
“People really grew up thinking that the bank is our friend, but it is simply not true, and so when we submit the mortgage request, we automatically submit to multiple banks to negotiate the best terms,” he said.
With regards to the coronavirus pandemic, Perez said that it has had a positive effect on the way people approach their finances.
“With the pandemic, people suddenly had a lot of free time on their hands with lockdowns and quarantines and so they began to look through their finances,” he said. “It started with what they buy in the supermarket, how much they pay for insurance, and led to where they can save on their mortgage.”
According to Perez, people also started watching the news more regularly.
“They sat and watched news and heard that Bank of Israel could freeze the mortgages – and suddenly they became more aware,” he said. “People started to realize that mortgages are not so scary, that they are dynamic, and not something you have to sit with for 30 years.”
As such, Perez said his office saw increased demand during the pandemic as people became more interested and knowledgeable about the mortgage market in Israel.
“COVID19 really gave us the opportunity to sit down and explain all about the world of mortgages to our clients,” he said. “They realized that they could save a lot of money that they would have had to pay in the future.”
Yet, while knowledge about mortgages is a step in the right direction, Perez said, “it doesn’t supply better mortgages unless you have the power- and this really applies to everything in life.”
As such, he added, this is where the importance of “purchase power” comes into play.
“When you come in with NIS 10 million in mortgages every week to the bank, you have bargaining power,” he said.
Perez said his firm also creates purchasing power by bringing together multiple homeowners in a certain neighborhood or city and approaching the bank in unison.
“We jump between banks and know how to create purchasing power by bringing several cases together to bring extremely good outcomes for our clients that we are really proud of,” he said.
Looking forward, Perez said he believes the demand for mortgages will only rise in the coming year.
“In Israel, demand for real estate, even during the coronavirus pandemic, is always high,” he said. “Now, as prices for real estate continue to rise, the demand for mortgages are rising right alongside.”
The reason for the spike in prices, he explains, is that the demand for housing in Israel is much greater than the supply - something he doesn’t believe will change in the near future.
“The gap between supply and demand is too high. For every apartment on the market there are 2.5 people competing for it, and so we are seeing this phenomenal increase in prices, even in the periphery of the country,” he said. “I don’t see it calming down anytime soon.”
He added that another effect of the coronavirus pandemic was that it brought in a lot more deals from investors with “loose change” that began investing in real estate, also contributing to driving up prices.
As for a solution to the high prices, Perez said he doesn’t believe that the actions taken by the government will make any real difference when it comes to lowering prices.
“In the rest of the world we see that rent control, massive building - these are solutions that work. If the government wants to reduce prices it needs to be actively involved and not remain passive,” he said.
Still, Perez remains optimistic. “People are still buying new houses every day, taking out new mortgages and reworking existing ones, and now they are armed with a new awareness and knowledge about the world of banking and mortgages,” he said. “They know they can consult with professionals, compare prices, and ultimately get the best terms to save for their future.”
This article is taken from The Jerusalem Post Annual Executive Magazine 2021-2022. To read the entire magazine, click here.
This article was written in cooperation with Perez & Cohen Mortgage