FG Strikes Deal for Sub-10% Mortgage Rates for Civil Servants
By Patience Ikpeme
The federal government has finalized an agreement with a mortgage company that will enable civil servants to access mortgage facilities to own their homes at interest rates below 10 percent.
The Ministry of Finance Incorporated (MOFI), Family Homes Funds Limited (FHFL), and ARM Investment Managers (ARM) jointly announced plans on Monday in Abuja to ease mortgage terms for Federal Civil Servants in Nigeria under the MOFI Real Estate Investment Fund (MREIF).
This development aims to continuously improve the conditions for accessing mortgages for federal employees.
To address the common barrier of equity contribution, both MREIF and FHFL will jointly provide significant portions of the required mortgage funding, requiring homebuyers to make a convenient equity contribution of only 10 percent.
This arrangement also reduces the interest rate for civil servants to a single digit. The strategy for this interest rate reduction involves blending funding sources with varying costs of capital, allowing loans to be delivered at significantly reduced rates. FHFL’s access to a funding line from the African Development Bank (AfDB) will play a vital role in lowering costs.
As part of the mortgage scheme, a well-structured loan distribution and management plan has been proposed. This plan will involve partner mortgage lenders granting the mortgage loans, with all loans designed to comply with the Nigeria Mortgage Refinance Company (NMRC)’s underwriting standards.
Dr. Armstrong Takang, Managing Director of MoFI, stated that this initiative is effectively implementing President Bola Tinubu’s vision to ensure Nigerians can own their homes with dignity.
“In other words, they can own homes at interest rates that make sense,” he explained. “We made it very clear from that point that all efforts should be made to continue to lower interest rates.”
Regarding interest rates specifically, Dr. Takang noted, “we set no more than 12 percent, and that effort will be made to continue to reduce that to lower figures. And today marks a very significant agreement, which is the coming together, a partnership between MREIF and the Family Homes Fund to bring funds that allow us to be able to own them to Nigerians.”
He further clarified, “They can get mortgages at single digits, that’s below 10 percent. And that’s what is symbolic and significant about this. And we’ll continue to do whatever we can to make sure that the cost of borrowing to Nigerians will continue to go down.”
Dr. Takang explained the mechanism for these lower rates: “How we’re able to do it, again, as an investment management company with our portfolio companies, we are constantly in the markets to find funds that are cheaper, whose interest rates are lower, so we can pass on those savings to Nigerians.”
“And this is one of those that we’ll be working with Family Homes Fund to find funds that are much cheaper than we had before. And the savings from those cheaper funds are being passed on to Nigerians through lower-cost mortgages,” he added. He concluded by saying that Nigerians can now go to their primary mortgage institutions to apply for these mortgages at these new interest rates, with the scheme starting immediately.
Sani Yakubu, National Coordinator for MREIF, stated that the agreement’s purpose is to increase the number of platforms that can reach Nigerians and to ensure that these mortgages can be provided for practically all Nigerians. He noted that the private sector is leading the charge, with fund managers being private sector institutions.
He explained that these fund managers are working with eligible financial institutions that have been in the industry for a while, including mortgage banks and commercial banks licensed by the Central Bank of Nigeria (CBN) to provide this service. “So Nigerians should have easy access and it shouldn’t be so difficult in any way, shape or form to access these mortgages,” Yakubu said.
He indicated that the project is beginning with a pilot in key areas of the country, with the hope that this will prove the concept and allow services to be spread to all parts of the nation very soon. He confirmed that a number of eligible financial institutions, including commercial and mortgage banks, have already been onboarded, with over ten such institutions currently finalizing agreements. The goal is to establish relationships with all mortgage and commercial banks open to providing mortgages to Nigerians.
Mounir Bouba, an Executive Director at ARM, the fund managers, stated that the fund is registered with the Securities and Exchange Commission and adheres to the guidelines and governance structure of the fund management industry.
Bouba explained that the MREIF Fund, the MoFI Real Estate Investment Fund, is designed to allow for up to 75% funding through a blended approach, enabling the issuance of mortgages at scale, and providing long-term mortgages for Nigerians. It also offers public guarantees for developers.
“So we have had various engagements with the stakeholders from the valuation and we have reached an even lower mortgage rate than the one that the Commission had,” Bouba stated. “So we signed an MOU that will allow Nigerians, basically, to borrow at less than 10 percent, single digit. And we will continue engaging some other stakeholders in the value chain.”
