Weekly mortgage applications rise 1.6% as interest rates hit a 7-year high

 

Interest rates for home loans appear to be climbing again, and that may in fact be what’s getting borrowers back to their brokers — fear that rates could move significantly higher in the coming months.

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Total mortgage application volume increased 1.6 percent last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted report.

Refinance volume led the charge, rising 4 percent for the week, although it was 39 percent lower compared with the same week one year ago. A year ago last week, rates were nearly a full percentage point lower.

The refinance share of mortgage activity increased to 39 percent of total applications from 37.8 percent the previous week.

Fleming: The housing market is shifting from a seller’s to a buyer’s market  

Borrowers who might have been thinking rates could move even lower may now be reacting to a new surge in rates, thinking they’d better get in now while the getting is still relatively good.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) rose to its highest level in more than seven years, 4.88 percent, from 4.84 percent, with points decreasing to 0.44 from 0.46 (including the origination fee) for loans with a 20 percent down payment.

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“As markets received various pieces of data indicating economic strength such as wage growth, inflation, and jobless claims, Treasury rates were up over the week,” said Joel Kan, an MBA economist.

Mortgage applications to purchase a home were basically flat for the week, moving just 0.3 percent higher. They were, however, 4 percent higher than the same week one year ago. Purchase applications were pretty slow all summer but have gained on an annual basis for the past five weeks.

Rising rates will only exacerbate already weakening affordability. Home prices continue to see gains, albeit smaller increases than in the past few years. Buyers are pulling back in high-priced markets like California, where homes are now sitting on the market longer and seeing price cuts.

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“With additional rate hikes on the horizon, mortgage rates will likely only continue to rise and squeeze the market,” said Mike Loewengart, vice president of investment strategy at E-Trade. “Right now there are a ton of positive signals in the economy, but clearly the housing sector is an increasingly glaring exception, and suggests the historic period of expansion we’ve enjoyed for the past decade could be winding down.”

Diana Olick

FHF to deliver decent accommodation for fairly low to modest income earners

 

The Managing Director of Family Homes Fund (FHF), Dr. Femi Adewole has said that FHF is committed to doing an excellent work in providing housing that people on low income can afford.

He made this statement during an Interview with HousingNews Crew earlier today in his office.

“we are doing tons of work in ensuring that we bank adequate land in good locations where these homes will be sited.

“We are ensuring that we maximize the efficiency of the design of these homes which is key to ensuring that we deliver the affordability that our people need” He said

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According to Dr. Femi, In line with the mandate which is centered on providing large scale affordable housing supply and economic development, “FHF is working in partnership towards providing up to 500,000 homes and 1.5million jobs from now till December, 2023”

“Primarily, we are working with partners who can build to scale so that we can harvest the economies of skills that then goes on to deliver lower prices to our target customers”

“we are currently talking to REDAN, Housing Corporations, Federal Ministry of Power, Works & Housing, State Governments, and other parastatals. We are bringing a whole range of people together to partner with us as they all have key roles in ensuring that this programme succeeds” he said.

Dr. Adewole said that FHF is putting a structure in place that allows people to actually be able to afford those houses and be able to buy them even after they have been built.

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“We are coming up and in the final stages of designing home loans assistance program that will ensure that our target market which is basically people who are earning fairly low to modest income can have access to decent accommodation at no more than 30% of their income.” He said.

The M.D. Family Homes Fund expressed with assurance that FHF being the largest housing fund in Sub-Saharan Africa stands a strong chance in delivering on its mandate.

“Because of the large capital that we have, the Family Homes Fund is the largest housing fund in sub-Saharan Africa so we are financing the program with a significantly concessionary interest and rate for development. If we put all those things together, I think it gives us a strong chance for delivering on the mandate.”

Wilson Ifeoma, HousingNews, Abuja.

Mortgage penetration in Africa: Nigeria ranks low

 

Nigeria has been ranked low among countries in the area of mortgage penetration and depth for home-ownership in Africa.

According to a report by Senior Advisor, UN-Habitat, Dr. Xing Guan Zhang, out of 31 countries ranked for the exercise, Nigeria took 27 position, scoring 0.3 per cent in mortgage penetration ahead of Guinea, Senegal and Burundi.

In the report, Malawi, Djibouti, Chad, Mauritania, Mauritius, Tanzania, South Africa, Angola, Liberia, Ghana, Togo, Rwanda, Botswana, Zambia and Cameroun took first to fifteen positions.

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In the area of mortgage depth, Nigeria was also scored low, ranking 10 with 0.4 per cent among 17 Africa nations considered for the exercise.

Countries such as South Africa, Namibia, Kenya, Botswana, Senegal, Rwanda, Algeria, Uganda and Cameroun were ranked 30 per cent, 20 per cent, 2.5 per cent, 2.3 per cent,2.0 per cent, 1.2 per cent, 1.2 per cent, 1.0 per cent and 0.5 per cent respectively ahead Nigeria.

In his report on “Financing and Developing Affordable Housing in Africa: What We Have Learned and How We Can Do Better,” Zhang noted that mortgage penetration and depth were much higher in wealthy countries.

He said: “When inflation is high, the interest payment is high in real values in the beginning, but this declines over years, if it is a fixed-rate mortgage.”

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Nigeria’s mortgage market has remained in slow growth due to plethora of reasons, some of which are now being addressed by major stakeholders in the mortgage industry.

The Nigeria Mortgage Guarantee Company (NMGC), Model Mortgage Foreclosure Bill and the Uniform Mortgage Underwriting Standards for both the formal and informal sectors of the economy are the most outstanding of the new initiatives in the industry.

Also, partnership among the Central Bank of Nigeria (CBN), the Nigerian Mortgage Refinance Company (NMRC) and the Mortgage Banking Association of Nigeria (MBAN) is more than enough comfort for both investors and home seekers.

To address the problems associated with land processes, the CBN is partnering with NMRC, which spear-headed the drafting of a Model Mortgage Foreclosure Bill, as well as MBAN and other strategic partners, to encourage the passage of a model mortgage foreclosure law in every state of the nation.

The apex bank has also provided states with the draft MMFL, and has held an MMFL workshop with their key representatives to ease their task to passage of the law.

Meanwhile, the nation has a housing deficit of about 17 million units and its mortgage rates ranging between 7-10 per cent for the National Housing Fund (NHF) and between 15-25 per cent for commercial mortgage institutions, which is considered by industry experts as one of the highest in the world.

According to the National Bureau of Statistics, real growth rate of the real estate sector, real GDP growth recorded in the sector in first quarter (Q1) 2018 stood at -9.40 per cent, lower than growth recorded in Q1 2017 by 6.30 percentage points and lower by 3.48 percentage points relative to Q4 2017.

Quarter-on-quarter, the sector grew by -30.57 per cent in the Q1 2018.

It contributed 5.63 per cent to real GDP in Q1 2018, lower than the 6.34 per cent it recorded in the corresponding quarter of 2017 and lower than the 7.03 per cent in the preceding quarter.

 

Dayo Ayeyemi

Legislative reform and drive towards model mortgage

 

To mortgage sector stakeholders in Nigeria, the need for a functional mortgage system cannot be over-emphasised. This is why the drive towards a model mortgage is receiving all the attention that it requires.

At the fore-front of this drive is the Nigerian Mortgage Refinance Company (NMRC) which is riding on the relative successes it has achieved in the past couple of years of its establishment and pushing for the adoption of a model mortgage and foreclosure law by the states.

As part of efforts at growing a mortgage system that will drive affordability, the company is presently driving a legislative reform in the mortgage sector by proposing a model mortgage and foreclosure law by key pilot states including Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Enugu, Kano and Ogun states.

What the company is driving at, according to one its directors whose primary mortgage bank is a major shareholder in the company, is to get various states houses of assembly to pass foreclosure laws as a prelude to mortgage-backed affordable housing delivery.

This is good news for home seekers who may need mortgage facility because foreclosure law, upon adoption, aims to fast tract the process for creating legal mortgages, ensuring timely resolution of disputes and creating an efficient foreclosure process.

According to the authorities of the mortgage refinancing company, the model mortgage and foreclosure law is in its final form for engagement with 21 pilot states committing to the implementation of an enabling environment for the development of the mortgage market.

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The company hinted that it would be focusing on building capacity and completing outstanding operational activities. “We will be embarking on an aggressive drive towards the procurement of an ICT infrastructure for the mortgage industry, the completion of our second tranche equity capital raise, and most importantly the completion of our first round of mortgage refinancing; we will work hard to meet our mandate to revolutionize the Nigerian mortgage landscape”, an official of the company hinted.

The company has demonstrated uncommon resolve to live out its mandate with refinancing of some mortgage banks. Mortgage operators have described this refinancing as a milestone and, according to Ben Akaneme, Imperial Mortgage’s managing director, “this is an outstanding achievement in the march towards the realisation of affordable and single-digit interest rates for mortgages in Nigeria. He assured that his bank would continue to strive to achieve its mission of enabling easily accessible and affordable mortgages to Nigerians in order to ensure housing for all.

NMRC seems to be conscious of the demands and obligations inherent in the Nigerian business environment as it assures that it will continue to anchor all its services on global best practices, good corporate governance and strict risk management practices.

By now, the company might have got from its shareholders the approval to, among other things, increase their capital base for three main reasons including capital adequacy, mortgage refinancing and procurement of necessary infrastructure.

As at the time when this request was made, the shareholders who saw the need for capital adequacy for the company, especially for its mortgage refinancing function, could not, however, come to terms with the management‘s explanation on the issue of infrastructure and, therefore, insisted that the capital raise be put on hold until the management was able to spell out those items of infrastructure that made the capital raise necessary.

NMRC came into the Nigerian mortgage market on a very high pedestal, promising a major shift in the interest rate regime in the market. But the authorities of the company have said that, though it is a partnership between the government and the private sector, the company operates as a private sector-led institution, relying on the market to determine interest rate on mortgage loans, meaning that the rate that applies to commercial loans also applies to its mortgage.

“The desire of NMRC, the Primary Mortgage Banks (PMBs) and the Central Bank of Nigeria (CBN) is to achieve single digit interest rate, but we are not there yet because the market does not allow single digit interest rate”, the official said, adding, “as it is today, we cannot meet the single digit interest rate until we are able to reach that point where the market allows it”.

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Right now, the company is working under market conditions hoping that, over time, as the market deepens and grows, the issue of single digit interest rate will be expected. Whatever the rate is today, the desire is to drive it down to single digit.

Chuka Uroko

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