By Olumide T. Agunbiade |Nigerian Writer and Blogger
I
|
F Nigerians were not buying homes when rates
were 18%, what happens now that rates have been increased to over 20%?
Back In October 2011, the Monetary Policy
Committee (MPC) in an emergency session to bail the depreciating currency, stabilize
the naira and peg the inflation pressure; announced the following rate changes:
Monetary Policy Rate (MPR) was increased by 275 basis points from 9.25% to 12%.
The Central Bank of Nigeria (CBN) also maintained the current symmetric
corridor of +/-200 basis points around the MPR. Also, the Cash Reserve Ratio
(CRR) was increased from 4 to 8%.
Before seeking and sampling the opinions of
experts on these astronomical hikes, several questions besieged my thoughts:
Should the quest to save the naira be a singular reason to hike? Did the MPC
consider the impact on the real estate sector?
Was the
timing right, considering the fuel subsidy removal already generating heated
debate? Does saving the depreciating naira and foreign reserve have a huge
economic impact as to adjusting rates and fiscal measures to impact on
agriculture and housing market?
Increasing
rates do not make it any easier for homeowners to sell and for existing
mortgage borrowers to maintain their loan facility. But, how much will it hurt?
Economists say, mortgage loans are the quickest loan basket to get re-priced
upwards in such market conditions.
Today, Michael Brown, 35, web designer, is
drawing his retirement plans. Recently, he inspected and planned to acquire a
property on mortgage; near Eleko beach road, Lekki Peninsula, close to the new
Airport, new Seaport and the Free Trade Zone.
Before
the hike, he was at an advanced stage of securing N15million loan to purchase
his dream home at an interest rate of 18%. Now at 22%, he needs an additional
N600, 000 in order to qualify for a loan on the N15million home he plans to
purchase. How many first-time home buyers have access to that kind of money?
In Nigeria, there is no mechanism for
risk sharing that will encourage banks and other financial institutions to
extend loans to people at the lower income level. Yet, if loans are less
expensive and easier to qualify, then the property becomes more liquid.
Also,
the absence of Credit Information Database [CID] that financial institutions
provide information to and can get the history of all information from-as
available in developed nations-ensured, Nigerian financial institutions settle
for lending to the rich.
Primary Financial Institutions [PMIs]
typically at the moment, offer equity loan rates of around 20%. In addition,
the borrower will pay 2% management fee
charged quarterly, 20-30% home equity contribution, legal fee charged by the
real estate attorney recommended by the bank and all title registration fees
required by the State government.
