Home financing under spotlight
The number of mortgages offered by five of the country’s commercial banks dropped last year amid escalating bad loans and rising demand for affordable housing in the country, Business News has learnt.
A mortgage is defined as a type of loan used to buy or maintain a home, land or other types of real estate and the borrower agrees to pay the lender over time.
The Africa Housing Finance Yearbook 2022 report shows that mortgages offered by five of the country’s eight commercial banks, namely NBS Bank plc, Standard Bank plc, National Bank of Malawi plc, FDH Bank plc and CDH Investment Bank dropped by 35 percent from 1 616 in 2020 to 1 040 in 2022.
During the review period, non-performing loans in these commercial banks increased by 58 percent to K161.9 million.
The report further indicates that the minimum loan size is K10 million to be paid over 24 months at a minimum mortgage rate of 19.9 percent per annum while the maximum rate is 24.8 percent per annum with a minimum loan to value ratio on residential mortgages at 85 percent of the value of the asset.
Reads the report in part: “Demand for affordable housing is escalating year-on-year. The cost of a newly built permanent house by a private or public developer is between K12 million and K15 million.
“Monthly rentals in the lower- end market in urban centres range between K10 000 and K20 000.”
The report said access to affordable housing in Malawi continues to be a challenge due to high poverty levels.
It said despite several government efforts to eradicate poverty through various policies, the share of Malawians living below the national poverty line declined slightly from 51.5 percent in 2016/2017 to 50.7 percent in 2022.
“A lack of sustainable economic growth and recurrent shocks such as drought and floods are some of the factors that hindered poverty reduction in the country between 2010 and 2021,” reads the report.
An informal worker in Blantyre, Regina Matewere, said with a monthly wage of K85 000 and two kids to feed, renting a decent home has been challenging.
She said: “I pay K10 000 for a two-roomed house in Chirimba’s lower end market area so that I can have more to buy basic necessities.
“However, the accommodation is not something that I would be happy to provide for my children.”
Speaking in an interview yesterday, Consumers Association of Malawi executive director John Kapito observed that people are building shacks because the cost of borrowing for building a house is high.
“We have on several occasions engaged the Reserve Bank of Malawi to at least facilitate cheaper sources of housing finance because as at now, it costs a lot to borrow and invest in property,” he said.
Association of Real Estate Agents in Malawi president Ken Msonda said in an interview yesterday that most of the land laws do not favour low-income earners in the country, as such, it is not easy to afford a house.
“Even the lending institutionsoffer conditions that are not favourable to the low-income earners,” he said.
Malawi Housing Corporation (MHC), is a government agency with mandate to build house while the Ministry of Lands provides land for construction of houses through public private partnership arrangements.
Africa Housing Finance Yearbook 2022 data shows that in the main urban centres, 30 percent of houses are owner-occupied while 60 percent are rented.
