All over the world, mortgage is known to be a viable method to owning a home, but several factors have made it difficult for most Nigerians to access mortgages. In developed countries, effective mortgage systems have aided many people to become homeowners but in Nigeria, there have not been many success stories recorded. We looked closely at mortgage models in Europe and America and found that a major enabler of their effective mortgage system is lower interest rates and longer repayment period.
Two months ago, the U.S. Census Bureau announced a homeownership rate of 65.5% for the year 2021; and in England, the House of Commons stated that 65% of its population were homeowners as at the end of 2020. This is contained in its “Extending home ownership: Government initiatives” report. These countries have single digit Mortgage interest rates – 6% in the United States and about 4% in England. Kosovo, Romania, Hungary, Singapore and Croatia all have home ownership rates above 90% with mortgage interest rates falling below 5%.
These mortgage systems have proven to be very effective, giving opportunities to more young people; millennials below age 30 to own homes. This is very important to note when you consider that generally, millennials all over the world are finding avenues to increase their incomes, encouraging the “gig economy”, innovations in tech and the benefits of remote work. In 2020, especially during the worldwide lockdowns, we read stories on Twitter about the increase in home ownership rates amongst millennials in countries like the US.
When we looked at homeownership rates in Nigeria, we saw a sharp difference. According to the “Housing Snap Poll” data by NOIPolls (a Nigerian consultancy company) only 31% of Nigerians as at 2014 lived in their 'personal house' which they may have built, purchased or inherited. This has negatively impacted the purchasing power of the average Nigerian. While this is many years ago, it is arguably true that due to inflation and recession, more Nigerians are poorer today than they were in 2014, and this means that less people can afford to own houses.
But let's come back to the conversation. If mortgage systems have significantly aided homeownership in other climes, why is it different in Nigeria?
Reports say that “85% of people in Nigeria would consider a mortgage as an option for home ownership” but availability, affordability and access are a major problem. Interest rates typically from commercial mortgage providers range between 15% to 25% per annum and up to 30% in some situations. In a bid to provide some respite, FMBN Act 3 of 1992, established the National Housing Fund (NHF) with the sole aim of mobilizing funds for the provision of “affordable” residential houses for Nigerians. In its 5 years of operation, the NHF was only able to disburse to 5,938 beneficiaries. It is understandable that the NHF can only disburse as much as is available in the treasury, there is still a big gap to fill especially with the lingering housing deficit.
What are your thoughts on the issues of the Mortgage system in Nigeria? DO you have any stories or experiences with it? We would love to hear from you. Please send your comments/feedback to [email protected]