Interest rate hike will worsen mortgage – Stakeholders

The stakeholders in the housing sector have warned that the high interest rate in the country is hampering mortgage adoption and limiting access to affordable housing.

According to them, the elevated interest rates are exerting pressure on the supply and demand sides of the housing market, resulting in increased costs for developers and reduced access to affordable mortgages for prospective homebuyers.

In an exclusive interview with The PUNCH, the Chief Executive Officer of Fame Oyster & Co., Olufemi Oyedele, said interest rate hikes would make borrowing more expensive, and slow down construction.

He said, “The high inflation rate in Nigeria signals an oversupply of money in circulation, largely driven by fiscal mismanagement and widespread corruption from previous administrations. The housing sector, which relies heavily on imported building materials, is already under severe pressure due to the soaring foreign exchange rates.

“With rising interest rates, both lending and borrowing, especially for mortgage loans, will be discouraged. Instead, we are likely to see an increase in capital market deposits as part of efforts to absorb the excess liquidity.

“For the average Nigerian, this translates into a challenging period for homeownership. Mortgage costs will rise, and the prices of building materials will continue to soar, putting home construction out of reach for many,” he noted.

He added that more people would likely resort to squatting or overcrowding the already insufficient housing units, as new housing developments (housing starts) were expected to plummet.

“Historically, housing is the first sector to feel the brunt of an economic downturn and the last to benefit from a recovery. Given the current high interest rate environment, the outlook for the Nigerian housing sector is particularly grim, with a decline in accessibility and affordability on the horizon,” he declared.

Also, the Technical Secretary of the Nigerian Society of Engineers, Victoria Island Branch, Babatunji Adegoke, said the impact of rising interest rates on the built environment would be significant.

He said, “Higher interest rates on loans for construction activities would lead to an increase in the cost of borrowing, contributing to rising construction costs. This could potentially lead to project delays or outright project cancellation, resulting in job losses and associated social impacts such as crime.

“Additionally, increased mortgage interest rates would reduce the affordability of housing for many citizens, potentially limiting the demand for new construction and reducing the industry’s contribution to the development of the economy.”

The organised private sector had earlier expressed fears that the interest rate hike by the Monetary Policy Committee of the Central Bank of Nigeria may worsen bad loans in various deposit money banks.

On Tuesday, the MPC for the fifth time this year increased the benchmark interest rate by 50

The Governor of the apex bank, Olayemi Cardoso, announced this at a press briefing after the 297th MPC meeting in Abuja.

He said the committee members unanimously decided to further tighten monetary policy.