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ITMB boss outlines challenges facing mortgage industry

The Managing Director and Chief Executive Officer, Infinity Trust Mortgage Bank Plc, Dr. Olabanjo Obaleye, has said that the mortgage industry was faced with several bottlenecks that needed the urgent attention of the Federal Government if it was determined to provide the 17 million housing deficit.  

Obaleye, who said this in an exclusive interview with Nairametrics in Lagos on Monday, noted that most of the challenges facing operators in the industry were caused mostly by the government and macro-economic situation of the country.  

He said, “If you have a challenge from the external environment there is nothing you can do than to adjust your system to it. Whatever affects other economic areas will affect the mortgage bank. The high-interest rate is a concern to us as it is to prospective homeowners.  

“The interest rate in Nigeria today is about 18% and there is no bank that will give loan for less than that. When you talk of mortgage loan, the question is where the sources of funding are, and what is cost of funding? High-interest rate impedes the growth of homeownership and the housing sector.”  

He added that mortgage banks needed a special window where they could get low-interest funds and crack down the interest rate on mortgages. 

The Federal Mortgage Bank of Nigeria (FMBN) is a secondary market operator that operates the National Housing Fund (NHF) as contribution from members at no cost which they are managing. Their sources of funds are very limited and now awareness is high. FMBN has done very well, far better than what obtains in the past but the gap is so much to make an impact and they won’t do more than the funding they have.”  

According to him, the foreclosure law was another factor hindering the growth of the mortgage industry. 

“We have classes of people that are on mortgage, they have the money but they are not willing to pay. We call such people chronic debtors. Do we have the right legislative infrastructure to ensure that you close any dispute on mortgage in a timely manner? We don’t still have it now.”   

Meanwhile, Nairametrics had reported earlier that Nigeria’s mortgage industry lending rates were the highest across the world. 

  • France: According to data from the Bank of France, the mortgage lending rate in France was 1.39% in June 2019.
  • USA: The average rate for a 30-year mortgage in the US was 3.67% while that of a 15-year mortgage was 3.1%, according to Bankrate.com
  • Germany: In Germany, the comparison website, Interhyp, has it that the lending rate for a 10-year mortgage was between 0.5% and 1%
  • United Kingdom: According to statistics, the average mortgage lending rate in the UK for a 10-year mortgage is 2.63%, while a 5- and 2- year mortgages were1.97% and 1.65% respectively.
  • Hungary:  There is a consensus that mortgage cost was high in Hungary, but it was only 5% for a 10-year mortgage. 
  • Greece: One would have expected that mortgage rates in Greece would be high given its struggle with debts, (sovereign and corporate) in recent years but the average floating rate for mortgages in Greece was just 3.08% in June 2019.
  • Hong Kong: Even with the effects of the political crisis in Hong Kong, the mortgage lending rate in that country, which inched upwards slightly, was still as low as 2.48%.
  • Japan: Japan has been at the forefront of keeping mortgage rates low, aimed at making housing affordable. In Japan, a 10-year mortgage is priced at 0.65% and banks like Sumitomo Mitsui Trust Bank are offering rates as low as 0.53%.
  • Australia: Although it may not be easy to get a lender that can grant 100% mortgage in Australia, according to Livingin-australia.com, the average mortgage rate in Australia was about 4.8% for a 5-year mortgage going by data from Australia’s four largest banks, (ANZ Bank, CBA, NAB, and Westpac).
  • South Africa: South Africa’s average mortgage rate was about 8%.

With mortgage rates so high in Nigeria, is it any wonder that there is a housing deficit in the country? The mortgage rate is about the major consideration when deciding on taking a housing loan. 

Research and analysis have it that in almost all countries, housing activities are spurred whenever mortgage rates are deliberately reduced or reduced as a result of prevailing economic circumstances. 

With Nigeria’s mortgage lending rate as high as 18%, there is no doubt that such high rate will act as a disincentive to housing activities and as long as the rates remain that high, the problem of housing deficit may not be solved any time soon. 

Credit: Nairametrics

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