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Interest Rate Hike to Worsen Mortgage Accessibility – Housing Sector Experts

Housing sector stakeholders have raised concerns that the rising interest rates in the country are hampering mortgage adoption and limiting access to affordable housing. They warned that the high interest rates are putting pressure on both the supply and demand sides of the housing market, leading to increased costs for developers and reduced mortgage accessibility for prospective homebuyers.
 
In an exclusive interview with The PUNCH, Olufemi Oyedele, Chief Executive Officer of Fame Oyster & Co., emphasized that higher interest rates would make borrowing more expensive, slowing down construction efforts.
“The high inflation rate in Nigeria indicates an oversupply of money in circulation, largely driven by fiscal mismanagement and corruption from past administrations,” Oyedele explained.
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“The housing sector, heavily reliant on imported building materials, is under immense pressure due to soaring foreign exchange rates. With rising interest rates, both lending and borrowing, particularly for mortgages, will be discouraged, prompting more investments in capital market deposits to absorb the excess liquidity.”
 
He added that the average Nigerian will face increased mortgage costs and rising building material prices, further pushing homeownership out of reach. He also predicted that more people would resort to overcrowding existing housing units, as new housing developments are expected to decline. “Historically, housing is the first sector to suffer in an economic downturn and the last to recover,” he added. "In the current high-interest environment, the outlook for Nigeria’s housing sector is bleak, with declining accessibility and affordability."
Babatunji Adegoke, Technical Secretary of the Nigerian Society of Engineers, Victoria Island Branch, also highlighted the significant impact of rising interest rates on the construction sector. “Higher interest rates on loans will raise construction costs, which may lead to project delays or cancellations, resulting in job losses and social challenges, such as crime,” he noted. “Moreover, increased mortgage rates will reduce housing affordability, limiting demand for new construction and reducing the industry's contribution to the economy."
 
Earlier, the organized private sector expressed concerns that the Monetary Policy Committee's interest rate hikes could worsen bad loans in banks. On Tuesday, the MPC increased the benchmark interest rate for the fifth time this year by 50 basis points, according to Central Bank of Nigeria Governor Olayemi Cardoso, who made the announcement at a press briefing after the 297th MPC meeting in Abuja.

Source: PunchNG

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