What must change to make affordable mortgage possible, accessible – Businessday NG

Across much of Africa, and especially in Nigeria, owning a home through a mortgage remains frustratingly out of reach for many households. The core problem is not demand, but an ecosystem that struggles to deliver long-term, affordable housing finance. Policy volatility, foreign exchange instability, and shifting regulatory requirements repeatedly disrupt planning, raise risks for lenders, and push up the cost of funds. In such a climate, mortgages become expensive, short-tenured, and scarce.

Why mortgages remain elusive

• Policy inconsistency: Frequent changes to fiscal, monetary, and FX policies undermine confidence and deter long-term lending.
• Regulatory uncertainty: Adjustments to capital requirements, sudden subsidy withdrawals, or aggressive monetary tightening directly inflate mortgage pricing.
• High interest rates: With lending rates often between 17 percent and 27 percent, monthly payments are simply unaffordable for most borrowers.
• Liquidity constraints: Limited access to long-term, stable funding means lenders struggle to offer tenors that match the needs of homebuyers.
• Land administration bottlenecks: Slow, opaque, and paper-based land title systems delay approvals and increase fraud risk.

The urgent need for a public–private compact

Sustainable housing finance thrives in stable and predictable environments. A structured, ongoing dialogue between government and mortgage market stakeholders is essential to craft durable frameworks that outlast political cycles. Such a compact should set clear rules for funding, collateral, foreclosure, subsidies, FX exposure, and data standards—giving lenders the confidence to extend longer-term credit at lower rates.

Practical reforms that can unlock affordability

1) Government-backed guarantees to de-risk lending

Well-designed guarantees can reduce credit risk for lenders, especially for first-time and lower-income buyers. By backstopping a portion of losses, guarantees encourage longer tenors and more competitive rates without compromising prudent underwriting.

2) Deepen the secondary mortgage market

A vibrant secondary market allows lenders to sell seasoned loans, recycle capital, and maintain liquidity. Strengthening refinancing institutions and standardizing mortgage documentation and servicing practices will help convert illiquid mortgages into tradable assets, expanding access at scale.

3) Inclusive credit scoring using alternative data

Traditional credit histories exclude many creditworthy Nigerians, particularly in the informal sector. Incorporating verified rent payment records, utility bills, payroll data, and mobile money transactions can widen eligibility and improve risk differentiation, enabling fairer pricing.

4) Targeted interest subsidies for low- and middle-income households

Well-targeted, transparent subsidy schemes can reduce effective interest rates and smooth monthly payments. To be sustainable, subsidies should be time-bound, income-tested, and paired with financial literacy to prevent over-indebtedness.

5) Digitize and clean up land registries

Digitized, searchable, and interoperable land records cut fraud, shorten verification timelines, and lower transaction costs. Clear, enforceable titles reduce collateral risk, enabling faster approvals and more investor confidence in mortgage-backed assets.

6) Align housing finance with urban planning

Mortgage finance works best when coordinated with serviced land, transport, and utilities. Integrating urban planning, infrastructure delivery, and housing finance ensures that new homes are buildable, livable, and bankable—reducing defaults and improving project viability.

Tackling the interest rate hurdle

Interest rates are the single biggest brake on affordability. To bring rates down and extend loan tenors, two levers are vital:

• Long-term capital: Expand access to long-dated, local-currency funding by deepening the secondary mortgage market and supporting institutions that provide refinancing liquidity to lenders. Standardization, transparency, and data quality are crucial to attract investors.
• Concessional windows: Calibrated public interventions—such as dedicated funds targeting low- and middle-income buyers—can lower the cost of borrowing and catalyze private capital. These should be performance-based, with clear eligibility criteria and strong governance.

Execution principles for lasting impact

• Policy stability: Commit to medium-term policy roadmaps that survive electoral cycles.
• Data and transparency: Establish market-wide reporting on loan performance, prepayment, and default to improve pricing and investor appetite.
• Consumer protection and literacy: Standardize disclosures, prevent predatory practices, and build borrower capacity to manage long-term obligations.
• Risk-based pricing: Reward verified income, stable employment, and solid collateral with lower rates and longer tenors.
• Digital rails: Enable eKYC, e-signatures, and interoperable platforms to cut costs and speed up processing.

The bottom line

Making mortgages affordable and accessible in Nigeria is not a mystery—it is a matter of consistency and execution. Stabilize policy, reduce risk for lenders through guarantees and better data, unlock long-term capital via a deeper secondary market, include more borrowers with alternative credit scoring, digitize land administration, and deploy targeted subsidies where they do the most good. With these changes, lenders can offer longer tenors at lower rates, and more Nigerians can finally step onto the property ladder.