In most economies of the world, including Nigeria, housing is one of the major economic indicators that shows how well the economy is performing. The growth of the housing sector is buoyed by the existence of a functional mortgage system that offers mortgage products and services.
The immediate fall out of the banking sector consolidation in 2005 which saw the emergence of 25 ‘strong’ deposit banks, was the increase in the number of mortgage institutions set up mainly by these consolidated and recapitalized banks.
Almost all of these mortgage institutions were ‘doing well’, churning out mortgage products and services that enabled their customers buy or build houses, or renovate existing ones. There were also products that enabled customers to acquire home equipment and other consumer products.
But in the last decade, for a combination of factors and, sometimes, inexplicable reasons, most of these institutions and their products are no longer seen on the streets, which speaks much about Nigeria.
Nigeria, most times, exhibits what could be termed growth paradox. As the country progresses, many of the things that could be used to measure growth and development are either retrogressing or diminishing. And the country’s mortgage market comes handy as an example.
The banking sector consolidation and recapitalisation led to the evolution of a competitive business environment and a culture of efficiency and innovation among the operators.
Institutions had to develop this competitive spirit not only to remain in business but also to increase and make good returns on shareholders’ funds such that innovative ideas, especially in product origination, became the norm.
The market was awash with products, especially those that would enable consumers have easy access to homeownership. Some of the mortgage institutions took it a step higher with the creation of products that would enable property owners build wealth from their property and yet enjoy the comfort of such property.
The First City Monument Bank (FCMB)’s ‘Unlock your Cash’ and defunct Bank PHB’s ‘Home Owner’s Advantage’ readily come to mind here and these are the kind of products that consumers need today in the face of the crippling economic downturn.
Unlock Your Cash, a variant of the bank’s flagship mortgage product, ‘MyHome’ was one of the most popular refinance products in Nigerian mortgage market then. People who have worked hard to build or buy their homes had the opportunity of letting those homes work for them by releasing the funds commensurate to the value of the property towards meeting other life needs.
Some customers who had been forced in the past to borrow short tenured loans of 3 to 5 years had the opportunity, through this refinancing option, to access the product where the bank paid off the offending loan owed the financial institution and provided more manageable repayment amounts that eased customer’s cash flow through the bank’s longer tenor.
For existing home owners, the bank allowed them to unlock up to 70 percent of the value of the property if they lived in it and 60 percent if they didn’t. It also provided home owners the opportunity of registering their titles making their properties mobile and ensuring that they were working for them just like share certificates made stocks fluid.
“We have been able to offer long tenured loans to the Nigerian mortgage market. Our observation before we entered the market was that only short term loans were available, making mortgages very unaffordable to the average salary earner. Now, with a longer pay back period, repayments are more manageable, with the option of reducing one’s principal outstanding when his economy improves or even leveraging more funds as the property price appreciates”, Ladi Balogun, former GMD/CEO of the bank, explained.
Home Owners Advantage was a wealth building product that, by its name, gave advantage to homeowners to build wealth on such homes. The product was different from traditional mortgage financing in the sense that it allowed those who owned their homes and had legal titles to them, to raise finance out of their property for a fixed period. The finance they raised could be used to buy new assets or create new investments, grow their wealth and have a good life.
The foregoing are just a few examples of the kind of products that the mortgage market enjoyed in “those good years” and both home owners and those who wanted to own one enjoyed them. Today, several years after, there is hardly any mortgage product that gives that kind of advantages or opportunities these ones offered.
Most of the products in the market today are those that enable subscribers pay house rent or school fees, and they come with impossible conditions and at outrageous interest rates.
Consumers are insisting that mortgage products should be able to meet ds their needs.What obtains in the market presently are generally unaffordable and do not give any advantage to existing and prospective homeowners.
However, not too long ago, Safetrust Mortgage Bank, one of Nigeria’s leading primary mortgage banks (PMBs), offered small business, traders and professional firms what it called Safe Annual Rental Scheme (SARS) to enable them pay rent for their homes, shops and offices
The facility is for subscribers who have established business relationship with the bank for a minimum of six months while a fixed amount is saved monthly with the intention of taking twice their contribution for rent purposes.
The product which offers a maximum amount of N1.5 million, a repayment period of 9 months, attractive and competitive interest rate, is coming on the heels of the company’s call on federal government to put in place measures to ensure lower interest rate regime so as to support economic activities that will lead to sustained growth of the national economy.
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