Uganda mortgages off to a shaky start in 2016
KAMPALA, FEBRUARY 4 -The outlook for mortgages in 2016 remains shaky as high lending rates take their toll on the sector. Lenders say they expect another bleak year for mortgages as borrowers adopt a wait and see attitude amidst the surging lending rates. Speaking off-record, book keepers at several Ugandan banks say they received fewer applications for mortgages during January 2016, in continuation of a slide that started in 2014.
Commercial bank lending rates peaked at 27 percent in December 2015 as the Central Bank held its rate at 17 percent.
“The commitment rate in 2014 was definitely better than last year,” said one commentator at a local bank who requested anonymity.
Lenders however see a lot of pent up demand for housing especially in the lower income segments but expensive credit is holding up many.
In anticipation of likely default as interest rates inch they way up, lenders are adoptcing different approaches. Housing Finance Bank for instance last year cushioned existing clients last year by locking in the interest rate on home mortgages at 18.5 percent.
Knight Frank Research also says in its Kampala Property Market Outlook that it received fewer property valuation instructions for mortgages from banks during the first and second quarters of calendar 2015, a trend it expects to continue into the first half of 2016.