Expect low rate mortgages in 6 months as FG sets stage for NMRC operation

For Nigerians, especially the low-income earners, who have been waiting to access mortgages at low-interest rate to buy or build their homes, an end to the waiting game is now in sight as the Federal Government has set the stage for full operation of Nigerian Mortgage Refinance Company (NMRC).

At the launching of the mortgage refinance company in Abuja last Thursday, the government announced that though the company has been launched, Nigerians would start accessing mortgages from June this year.

Femi Johnson, president of the Mortgage Banking Association of Nigeria and CEO, Homebase Mortgage Bank, confirmed to BusinessDay in Lagos that refinancing of mortgages, which would bring about low-interest rate, would start in June, stressing, however, that operators would start lending to borrowers almost immediately.

NMRC is a secondary mortgage company and, the way it is planned, it will refinance mortgages that will be originated by primary mortgage lenders, including Primary Mortgage Banks (PMBs) and commercial banks that are into mortgage business. The company is also planned in such a way that for any institution to be able to refinance, it must have shares in the company.

By way of shareholding in the company, mortgage banks and the Mortgage Banking Association of Nigeria (MBAN) will be controlling 50 percent, commercial banks 20 percent, finance ministry 20 percent, International Finance Corporation (IFC) 10 percent, all making up 100 percent.

According to Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of finance, NMRC is expected to pull down lending rates for housing from the current spread of 20-23 percent to the low double digits or at least to a high single digit.

The minister, who spoke at the launch of the company, said, “This company is being set up to help lower the funding cost of mortgages and promote the affordability and availability of good housing to working Nigerians by providing mortgage lending banks increased access to liquidity and longer-term funds in the market.”

NMRC, which is taking-off with N6 billion capital, will be floating bonds in the capital market to raise additional finance for its operations later in the year and, as the finance minister put it, $250 million out of the $300 million soft International Development Association (IDA) loan approved by the World Bank for the company would be disbursed to it by instalment as tier-2 capital.

She added that $25 million would be used for the establishment of a mortgage guarantee facility for lower-income borrowers, while the remaining $25 million would be used to support the Federal Mortgage Bank of Nigeria (FMBN) to enable it to strengthen its programme on mass housing and also to pass on some of it to microfinance institutions to also enable them to on-lend to low-income people and carry out renovation work on their homes.

Apart from ‘crashing’ interest rate on mortgage loans, NMRC is also expected to deliver about 750,000 homes annually and create an enabling environment for primary mortgage banks and other financial institutions to offer 15- to 20-year mortgages at affordable rates to Nigerians.

By: Chuka Uroko