Mortgage lending rates higher in Dar, Abuja-study

18Mar 2016
Our Reporter
The Guardian
Mortgage lending rates higher in Dar, Abuja-study

MORTGAGE lending rates are higher in Nigeria and Tanzania compared to other African countries with Dar’s rates rising steadily since 2010, a new study has said.

Oscar Mgaya - CEO of Tanzania Mortgage Refinance Company

The study titled, ‘Role of Mortgage Liquidity Facilities in Housing Finance: Lessons Learned from Egypt, Tanzania, Nigeria and Malaysia sponsored by Centre for Affordable Housing in Africa and Financial Sector Deepening Africa and conducted in Egypt, Tanzania and Nigeria, indicated that despite having several similarities, Egypt has much better mortgage facility.

“Low bank intermediation is associated with higher interest rates and bank spreads, lending rates are particularly high in both Tanzania and Nigeria.

In Tanzania, the lending rate has been rising steadily since 2010 and now stands at 16.20 percent,” the study published last February said. It stated that the deposit rate increased sharply from 6.80 percent in 2011 to 9.90 percent in 2012 noting that the deposit rate was 9.90 percent leading to an interest rate spread of 6.30 percent in 2014.

“Nigeria’s lending interest rate stood at 16.50 percent in 2014 and is the highest lending rate of all four countries included in this study. With a deposit rate of only 9.30 percent, Nigeria also has the highest interest rate spread,” the report noted.

In Egypt, both lending and deposit interest rates have decreased between 2013 and 2014. The lending interest rate was 11.70 percent in 2014 and the deposit interest rate 6.91 percent leading to an interest rate spread of 4.79 percent.

“In stark contrast with Egypt, Tanzania and Nigeria, the lending interest rate in Malaysia was only 4.60 percent in 2014, the deposit interest rate was 3.00 percent and the interest rate spread a low 1.50 percent,” the report pointed out.

But on its website, the Tanzania Mortgage Refinancing Company has said interest rates have since fallen. “TMRC continues to enjoy the 5 percent discount from World Bank funds.

The price is calculated based on the prevailing 182 days Treasury Bills way, risk premium and maturity spread," the company which is under Bank of Tanzania said.

Last January, Bank of Tanzania issued a circular which announced reduction of risk weight for residential mortgages from 100 percent to 50 per cent following recommendations received from various stakeholders of the banking sector.

“Bank of Tanzania has considered and decided to reduce the risk weight assigned on residential mortgages for capital charge from 100 percent to 50 percent.

The new rate shall only apply to residential mortgage loans as defined in the Banking and Financial Institutions (Mortgage Finance) Regulations, 2011. This change shall take effect for capital adequacy computation from 31st January, 2015,” the circular stated.

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