The largest mortgage lenders in Africa’s largest economy are not feeling the pang of rising interest rates yet as an acceleration in transaction volume of transactions has underpinned profitability.
This means that they are extending housing loans to their customers in an environment where over half of the population of 200 million cannot afford to buy a home.
“Of course, an improvement in their earnings is a function of increased volume of transactions rather than rising interest rates,’’ said Tajudeen Ibhrahim, director of research at Chapel Hill Denham. Normally, when the central bank hikes the interest rate to tame stubbornly high inflation, mortgage rates tend to go up.
However, Ibrahim said that mortgage rates are not as volatile as other short term loans and he is sanguine that sector players will continue to record double digit growth in earnings till 2023.
Infinity Mortgage Bank Plc and Living Trust Mortgage Trust Bank Plc collectively saw interest on loans to customers surge by 122.84 percent to N2.54 billion in June 2022 from N1.14 billion the previous year, according to data gathered by MoneyCentral.
Their combined profit spiked by 21.06 percent to N1.18 billion in the period under review from N980.36 million as at June 2021.
These firms gave out N23.13 billion in loans to their customers, which is 5.36 percent higher than N10.57 billion the previous year.
To mitigate the impact of inflation, the Central Bank of Nigeria (CBN) has raised the interest rates to a 20-year-high of 15.5 per cent.
Nigeria’s Inflation hit a new high of 20.77 per cent in September as food supply, foreign exchange crisis, and increases in import costs worsened, according to the National Bureau of Statistics.
In August, the nation’s inflation rose to a 17 year high of 20.52 per cent which has now been broken by September’s figure.
Analysts say the mortgage sector is grappling with high cost of construction, surging land prices and excessive financing costs even as there are potentials in the N6.43 trillion industry.
Of course, a lot of Nigerians are oblivious of the opportunities that abound in the industry as they are not getting sensitized.
The Federal Government, through its Bank of Industry (BOI), said N21 trillion is needed to bridge the estimated 28 million housing deficit.
“There should be a continuous upgrade of neighbourhoods that are in a state of decay into liveable and organised housing facilities and development of low cost housing that is affordable and accessible to interested home buyers,” said BOI.
“Accessibility to infrastructure will encourage people to move away from crowded urban centres to developing areas. Adopt digital technologies such as virtual tours, augmented reality, etc, in showcasing properties so as to generate interest in the buyer’s mind.”