Experts in the Housing Sector Say Interest Rate Increase Will Make Mortgages Harder to Access.

Concerns have been expressed by some involved in the housing sector that the nation’s growing interest rates are impeding the adoption of mortgages and restricting access to reasonably priced property. They cautioned that rising interest rates are straining the housing market’s supply and demand, which will raise developer costs and make it harder for potential purchasers to get a mortgage.

The CEO of Fame Oyster & Co., Olufemi Oyedele, stressed that rising interest rates would increase the cost of borrowing and impede building projects.

Nigeria’s high rate of inflation, according to Oyedele, “indicates an excess of money in circulation, largely driven by fiscal mismanagement and corruption from past administrations.”

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“Soaring foreign exchange rates are putting tremendous pressure on the housing sector, which is largely dependent on imported building materials. Rising interest rates will discourage lending and borrowing, especially for mortgages, which will lead to an increase in capital market deposit investments to absorb the extra liquidity.

He went on to say that rising mortgage rates and the cost of building materials will make homeownership even more unaffordable for the typical Nigerian. Additionally, he projected that as new housing developments are anticipated to drop, more individuals would turn to cramming existing housing units. “Historically, during economic downturns, the housing sector is the first to suffer and the last to recover,” he continued. “In the current high-interest environment, the outlook for Nigeria’s housing sector is bleak, with declining accessibility and affordability.”

The substantial effects of growing interest rates on the building industry were also emphasized by Babatunji Adegoke, Technical Secretary of the Nigerian Society of Engineers, Victoria Island Branch. “Higher loan interest rates will increase construction costs, which could result in project cancellations or delays, which would lead to job losses and social problems like crime,” he said. “In addition, rising mortgage rates will make housing less affordable, which will limit the demand for new construction and lower the sector’s economic contribution.“

The organized private sector had previously voiced worries that interest rate increases by the Monetary Policy Committee may make bank bad loans worse. At a news conference following the 297th MPC meeting in Abuja on Tuesday, Central Bank of Nigeria Governor Olayemi Cardoso announced that the MPC has raised the benchmark interest rate by 50 basis points for the fifth time this year.

Author: Paul Okoh