Mortgage Rates at 27% Push Homeownership Beyond Reach for Middle-Income Nigerians
The Chief Executive Officer of the Mortgage Banking Association of Nigeria (MBAN), Adedeji Ajadi, has warned that Nigerians earning below ₦500,000 monthly are effectively priced out of homeownership as mortgage rates climb to between 18 and 27 percent.
Ajadi highlighted that with mortgage penetration below one percent, the sector is failing to provide viable housing solutions despite Nigeria’s estimated 28 million housing deficit. Inflationary pressures, currency volatility, and escalating construction costs have eroded affordability, leaving many households unable to meet repayment obligations.
He noted that mortgage holders are now devoting over 40% of their income to servicing loans well above the internationally accepted benchmark of 30%. The strain has forced many Nigerians to rely on incremental building and informal housing arrangements instead of accessing formal mortgages.
Structural Barriers in the Sector
Beyond high interest rates, Ajadi identified systemic constraints stifling the mortgage industry. These include short repayment tenures, weak land titling processes, cumbersome legal systems, and ineffective foreclosure laws. The exclusion of informal sector workers who account for nearly 85 percent of the workforce further narrows the market.
He also acknowledged widespread distrust in mortgage institutions, which discourages many prospective borrowers from considering formal financing.
Reforms and Alternative Models
Ajadi outlined urgent reforms needed to revitalise the sector, including digitising land registries, adopting alternative credit scoring models, and introducing flexible mortgage products such as micro-mortgages, cooperative lending, income-linked repayments, and step-up loans. He called for greater government support through long-term liquidity provision from the Nigeria Mortgage Refinance Company (NMRC), expansion of mortgage subsidies, and risk-mitigation mechanisms. Ajadi also urged adoption of creative homeownership models like rent-to-own and shared equity to improve access for younger Nigerians.
Untapped Potential in Diaspora Financing
Diaspora remittances, which surpassed $20 billion in 2023 according to the World Bank, represent a significant but underutilised source of housing finance. Ajadi argued that fraud concerns, lack of transparency, and rigid mortgage structures have discouraged diaspora Nigerians from investing in real estate. He proposed tailored, diaspora-friendly mortgage platforms to channel more of these inflows into housing.
Institutional Investment Gaps
Ajadi further pointed out that pension funds and institutional investors remain largely absent from the mortgage sector due to weak data systems, inconsistent valuation practices, and fragile foreclosure frameworks. He urged regulators to tighten oversight, standardize valuations, and implement robust risk frameworks to attract long-term capital into the market.
Conclusion
Ajadi concluded that without comprehensive reforms, homeownership will remain out of reach for the majority of Nigerians, turning it into a privilege for the few rather than a pathway to long-term financial security.
