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Rising interest rates could exacerbate the burden of mortgage payments
Housing industry experts have issued a dire warning, citing elevated interest rates as a major obstacle to mortgage adoption and affordable housing access. These rates, they argue, exert a detrimental impact on both the supply and demand sides of the housing market.
On the supply side, developers face increased construction costs. On the demand side, prospective homebuyers struggle to qualify for affordable mortgages.
Olufemi Oyedele, CEO of Fame Oyster & Co., emphasized the adverse effects of increasing high interest rates in an interview with The PUNCH. He noted that they make borrowing more costly and hinder construction activity.
He noted, “The effect of the high-interest rate is that it is the base rate for determination of mortgage rate, commercial loan rate, and standard of living. This high interest rate will affect the cost of building materials, construction generally, and affordable housing.
“The mortgage interest rate will go up and prospective house buyers, who are trying to get a mortgage loan, will face food first and forget about housing. There will be a lot of squatters and people living in slums.”
Similarly, the Chief Executive Officer, Jofame Integrated Limited, Gideon Mfonabasi, said interest rates would lead to a decline in homeownership.
He said, “So, the very foundation of mortgage presupposes that people are not able to raise all the funds required to own a home. Housing is a basic human need and if everybody were to be able to afford what it costs to own a home, nobody would go for a mortgage.
“So, globally and Nigeria inclusive, it is clear that if people must have access to housing and affordable housing, in particular, mortgage would play a very critical role.
“Hence, if it is about affordability then what is clear is that if the interest rate is high you are going to be excluding a whole lot of people who normally would have wanted to own a home. So, affordability in housing is tied to low interest rates and that is why you see that even though a majority of Nigerians are not accessing the National Housing Fund.”
According to Mfonabasi, the right interest rate is essential to bridging the affordability gap in the housing sector.
He said, “Without the right mortgage rate we cannot be talking about affordable housing and that is the reality. So, there is a lot that the government must do to make funding available.
“It is a system that needs to be put in place and they are funding that we can access in our country to see how we can put a system in place that delivers this critical need for our country and citizens.”
Also, the Chief Executive Officer of Riel Homes, Dr Kolade Adepoju, stated that the increase in interest rate would lead to unaffordable homes for people.
He asserted, “The impact of high interest rates on mortgages and affordable housing is that if the mortgage interest is too high, it becomes unappealing and unaffordable for people. In essence, it is no longer a viable mortgage option. As a result, people will be discouraged from taking out a mortgage, and the dream of owning a home will become even more elusive.
“The primary purpose of a mortgage is to enable individuals to purchase a home and pay for it over an extended period. However, with high interest rates, this becomes unfeasible, and people may be unable to buy homes.
“Therefore, housing deficits will likely increase in the community or society, exacerbating the housing shortage and making it even more challenging for people to secure affordable housing options.”
The Monetary Policy Committee of the Central Bank of Nigeria recently increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.
The Lagos State Government has said it would soon arrange a meeting with developers/owners of distressed buildings on how best to address the redesign and remodelling of such structures by November.
This was disclosed recently by the Commissioner for Physical Planning and Urban Development, Oluyinka Olumide, at a function in Alahusa, Lagos.
Olumide said the prevalence of distressed buildings in different parts of the state was worrisome and needed the urgent attention of all stakeholders.
He said, “The Ministry of Physical Planning and Urban Development as mandated by the Lagos State Urban and Regional Planning and Development Law, 2019, as amended, was willing to extend its responsibility for approving the remodelling of existing buildings to provide technical assistance to developers and owners of distressed buildings, especially on the design and remodelling of such buildings.
The Federal Government has instructed the contractors responsible for the 107km Enugu-Onitsha road dualization to expedite the project.
This directive was given by the Minister of Works, Senator David Umahi, during a meeting with MTN, the Enugu State Government, and the contractors, RCC Ltd and Nigercat Ltd, on Friday.
According to a statement released on Friday, the minister said he is disappointed over the slow pace of work on the project, he said, “Let me express my disappointment over the slow pace of work on that project. It is one of the worst roads in this country.
“Everywhere we have diversion; diverting from the one that RCC and Nigercat had completed, the contractors are not kind enough to even put stone based on the diversion points.”
He added, “So, by the reason of the launching of our Operation Free our Roads, it is now a violation of the policy on the side of the controllers and directors of the Federal Ministry of Works where we have vehicles falling on any project that is ongoing or where there are potholes on our roads.”
He also blamed the sufferings of road users on the lack of commitment and insensitivity of the contractors.
“The public must know that the President’s intention is not for them to suffer while trying to fix the roads, and it is their right to insist that contractors should fix the roads that they are engaged on,” he said.
The Minister commended the Enugu state government for their resolve to fund the construction of a 20 KM section of the road and expressed hope that MTN would execute the second phase of the project.
He noted, “Why the Enugu State government is intervening is because of the slow pace of work by the contractors and because of funding issues. The essence of tax credit is for funds to be made available. And so, I don’t see RCC going to keep their promise to finish this project in 6 months.
“My advice to MTN is to look for another contractor within that axis if they want to get the job done. Division of labour is even the best. While they are doing the road, and if Nigercat is doing a good job, you can give them greater scope to do if you want to finish that job.”
He warned contractors that the Federal Government would not accept phased handovers of projects and has phased out Variation of Price in contract administration.
The Ekiti State government has intervened to resolve a longstanding land dispute between the Elepe of Epe-Ekiti, Oba Ayodele Adesoye, and the Atolagbe family. The government cautioned against the misuse of modernization as an excuse to disregard traditional customs.
In line with the community’s traditions, the government has ordered the release of resources, including palm trees at Oko Oba Farmland, to Oba Adesoye for his administration. This decision ensures the continued adherence to age-old practices.
Ekiti State Deputy Governor, Chief (Mrs) Monisade Afuye, announced the resolution in Ado-Ekiti. The decision was made after considering the Elepe’s claim to Oko Oba Farmland based on historical evidence.
Mrs. Afuye acknowledged the Elepe’s right to be the custodian of Oko Oba Farmland, citing longstanding traditions that support his claim. The decision reflects the importance of respecting historical practices and ensuring their preservation.
The deputy governor, however, told the monarch in clear terms that other princes and princesses from all the three ruling houses should be allowed to farm on the land without payment of royalty.
Mrs Afuye appealed to the community to comply with the government’s position to restore unity, peace and orderliness to the beleaguered community.
Oba Adesoye expressed gratitude for the government’s decision and pledged to foster peace and unity between the throne and the community, aiming to accelerate Epe’s development.
Representing the Atolagbe family, Dr. Yemi Agbeleoba acknowledged their willingness to cede Oko Oba Farmland to the monarch. However, he emphasized the need for all three ruling houses to participate for a lasting and traditional solution.
Agbeleoba expressed appreciation for the government’s directive, believing it will contribute to resolving the long-standing conflict.
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