High interest rate, low wages push mortgage out of Nigerians’ reach - Punch Newspapers

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Mortgage

1/17/2022 9:18:00 PM

High interest rate, low wages push mortgage out of Nigerians’ reach - Punch Newspapers

The most widely read newspaper in Nigeria

“The third layer, which comprises the mortgage funders, is like the market itself. The market funds it. They can just go to the market and raise bonds. They have different ways of raising funds. The thing is that our system is different. Here, what the mortgage broker and servicer do is what the mortgage banks do.“

“For many years, we have not had a mortgage funder. It is on this basis that the association of the mortgage bankers met with the Ministry of Finance and there was a lot of engagements that led to the creation of the NMRC. There are further engagements now that is expected to lead to the creation of two more bodies – The Nigerian Mortgage Guarantee Company and the Nigerian Mortgage Warehousing Company. Those ones are coming up very soon. What we have now is Nigeria Mortgage Refinance Company.”

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Mortgage subsector fast adapting to ‘the next normal’ – Simon “The third layer, which comprises the mortgage funders, is like the market itself. The market funds it. They can just go to the market and raise bonds. They have different ways of raising funds. The thing is that our system is different. Here, what the mortgage broker and servicer do is what the mortgage banks do.“ “For many years, we have not had a mortgage funder. It is on this basis that the association of the mortgage bankers met with the Ministry of Finance and there was a lot of engagements that led to the creation of the NMRC. There are further engagements now that is expected to lead to the creation of two more bodies – The Nigerian Mortgage Guarantee Company and the Nigerian Mortgage Warehousing Company. Those ones are coming up very soon. What we have now is Nigeria Mortgage Refinance Company.” “The NMRC was created as a liquidity vehicle. They are the ones who go to the market to issue bonds and the primary mortgage banks can then request liquidity from them but the situation is still different from what obtains overseas in the sense that for primary mortgage bank to request liquidity from the NMRC, they need to give them block of perfectable mortgages. They must have created those mortgages for a minimum of six months. Banks cannot also get as much funds as they are looking for. They have to meet a uniform underwriting standard.” “If you go to free rate updates and check the rates today in the US. It gives an average rate as low as 1.7 per cent. In the Western world, all mortgage rates are single digits. The highest you will get will be in the region of six to seven per cent. This brings more people into the affordability bracket. That is also because the source of funds for the mortgage servicers enables them to do that. In Nigeria, people fix money with mortgage bank for as high as 12 per cent. Even the NMRC, when they are giving money to banks, their rates are as high as 12 per cent. So, is it possible for any mortgage bank to now give you a mortgage at single digit? It’s impossible. The business of banks is the business of margins, of intermediation.” He further criticised the systemic corruption in the country’s private and public sectors, noting that it had made the process of obtaining a mortgage, particularly the government-funded mortgage schemes, very difficult. According to him, until the global best practices are embraced in the sector in the country, alongside a significant shift in the average wage structure, the subject matter of mortgage will remain a distant reality for most Nigerians. “What is the earning power in the West compared to Nigeria? That is a place where you will see a driver earn between $1,000 to $3,000. Professors don’t earn that in Nigeria. If these issues are not fixed, no matter the kind of inclusion that you are driving in Nigeria, it is going to keep a lot of people outside the bracket.” Copyright PUNCH. All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH. Contact: