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Mortgage recapitalisation must enable single digit interest – Expert

By on August 16, 2013

Two property management consultants, Andem Bassey and Segun Olutade, have made recommendations on how to ensure the success of the proposed mortgage sector reform in Nigeria.

While Bassey enjoined the Central Bank of Nigeria (CBN) to ensure that mortgage banks’ recapitalisation translated to single digit interest rates on loans, Olutade advised commercial banks to offer full mortgage services to save the property industry from collapse due to financial inadequacies.

Bassey, the Managing Partner of Andy Bassey & Associates, stated that it was possible for mortgage banks to give loans at single digit interest rates, stressing that mortgage banks’ recapitalisation in the country would not make sense if they could not offer loans at single digit interest rates.

“The housing industry will not succeed with the current lending rate of 20 per cent interest rate which does not include other charges. Interest rate on loans is a serious problem which we expect the recapitalisation of mortgage banks to address and of which is at the core of the restructuring of the industry,” he said.

According to Bassey, giving mortgage loans with repayment period of less than 10 years is not a positive development.

“Interest on lending ought to be between one and nine per cent, while the repayment period should be between 10 years and 30 years,” he said.

He said high interest rates were the major reason people who took loans defaulted in their repayment.

The consultant also said that the National Housing Fund (NHF) needed to be restructured for the beneficiaries to enjoy the policy because beneficiaries of the NHF Scheme are always frustrated with the rules mortgage banks attach to loans.

Commenting on the issue, Olutade, Executive Director, Shelter-Watch Initiative, said that lack of funds was one of the major challenges facing the property industry and that commercial banks in the country were strategically positioned to revamp the mortgage market and save the property industry.

“Commercial banks need to start offering full mortgage services and products instead of other loans disguised as mortgages,’’ he said.

He added that commercial banks should be more proactive in discovering and rendering services that would boost the mortgage system.

“If more people can afford homes through sound mortgage services, it will improve the Gross Domestic Product which would have positive effects on our economy,” he said.

Olutade said that commercial banks should not use specialisation as an excuse to run away from the services.

“In the UK, commercial banks offer full mortgage services,” he noted, maintaining that “Commercial banks should serve as one-stop shop for all financial activities due to their proximity. Since commercial banks have branches all over the states, they are better equipped to provide mortgage services.”

Olutade therefore urged the Federal Government to direct the banks to create more consumer-friendly mortgage products and start offering mortgage loans.

“If the banks could start offering full mortgage services, it will go a long way to revamp the real estate industry,’’ he stated.

 

 
[Daily Independent]