Unstable interest rates affecting mortgage business
The West African Head, Retail Estate Finance West Africa, of Stanbic IBTC, Mr Niyi Adeleye, has said the unstable interest rates levels across countries have a negative impact on affordability of mortgages.
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He said the finance markets had become unlimited largely because of the unstable interest rates in local currency as against international currencies.
In an interview with the GRAPHIC BUSINESS at the West Africa Property Investment Summit, Mr Adeleye said: “For mortgages to become sustainable and adoptable to the market, the rates should be a low double digit or high single digits between the ranges of probably nine to 14 per cent local currency rate. Until we get there, the mortgage market will struggle”.
Most people shy away from mortgages because of the volatile nature of interest rates that tend to affect the repayment of loans acquired, something that continues to be a challenge for most prospective homeowners.
He pointed out that the market share in terms of mortgage market in West Africa was difficult to predict, stating that the mortgage market was not well developed and the estimate share now was less than 50,000 in Nigeria and might be lesser in Ghana.
Mr Adeleye noted that managing the primary market was still challenging enough to introduce the secondary market instrument. The most viable secondary marketing is the mortgage backed by securities and this depends on the vibrant public equity market.
“Commercial mortgages is 10- 15 per cent of the entire Stanbic portfolio which goes into mortgage marketing. The actual amount is not stable because it’s a moving target on a daily basis,” he said.
Need for policies
Mr Adeleye advised that there should be much focus on developing the interest in acquiring homes through mortgage.
“The entire market is at risk for liquidity or affordability of products.There is the need to support the industry in a sustainable and sensible manner, when the business cycle has been moved from a decline to a growth face you expand your ability to support the market,” he said.
He explained that the industry remains attractive because the demand was strong and the supply gab was quite wide, so therefore, it could be expected that there should be a flow of capital in the market in the down cycle till when it picked up again.
He called on the government to create policy-driven initiatives that could influence interest rates to decrease, adding: “There should be an enabled environment where the markets are grown at a much faster pace by creating jobs at a higher level and avoiding imported inflation”.
He said low interest rates would make it easier for financial institutions to lend at those levels that would make mortgages attractive to people.
He also reiterated the need to limit the level of imports in the local economy, in a bid to ensure the stability of the local against other international currencies.
Measuring affordability
He said affordability could be measured in two ways, that is, one’s ability to pay in instalments or the ultimate cost of the housing unit.
He encouraged the use of policies as a way of dropping the cost of home ownership and added that it was the easier way for the middle and social class to work better and earn more if government had adequate resources to commit to housing affordability.