Group raises the alarm over rising loan defaults

The Housing Development Advocacy Network (HDAN) has expressed concern over the rising level of loan defaults by customers of mortgage banks in Nigeria, warning that the situation could further weaken the already fragile housing finance system if urgent measures are not taken.

HDAN noted that while efforts are being made to expand access to mortgage finance and promote homeownership, the increasing rate of loan default poses significant risks to mortgage institutions and could discourage long-term investment in the housing sector.

The advocacy group particularly observed that construction loans appear to be the most affected category of mortgage lending, stressing that the rising default rate in this segment has significantly contributed to the financial challenges currently faced by many mortgage banks in the country.

According to HDAN, construction financing is a critical component of the housing delivery chain, as it enables developers to build new housing units. However, the growing inability of some borrowers and developers to meet their repayment obligations has placed enormous pressure on mortgage banks, with some institutions struggling to remain stable.

In a statement signed by its Executive Director, Festus Adebayo, the organisation called on the Federal Government and relevant financial authorities to urgently consider the establishment of a Mortgage Guarantee Company in Nigeria to help mitigate risks associated with mortgage lending.

According to the statement, a Mortgage Guarantee Company would provide credit guarantees that protect lenders against borrower default, thereby encouraging banks and financial institutions to extend more mortgage loans to Nigerians, especially low and middle-income earners.

Adebayo explained that the absence of effective risk-sharing mechanisms in Nigeria’s housing finance system has made mortgage lending extremely cautious and limited, leaving millions of Nigerians unable to access affordable homeownership opportunities.

“Mortgage banks are increasingly exposed to risks arising from loan defaults. Without adequate safeguards, this situation may discourage lending and further shrink the already limited mortgage market. Establishing a Mortgage Guarantee Company will help cushion the impact of defaults and boost confidence in the housing finance ecosystem,” he said.

He further stressed that government intervention has become urgently necessary, particularly in addressing the rising default in construction loans which are essential to housing supply.

“Construction financing is central to housing delivery. When developers and borrowers default on these loans, it creates serious financial strain on mortgage institutions and slows down housing development. This is why immediate government intervention is required to stabilise the sector,” Adebayo added.

HDAN noted that many countries with successful mortgage systems operate mortgage guarantee institutions that support lenders, improve credit access and stimulate housing development.

The advocacy group stressed that the proposed Mortgage Guarantee Company would not only protect lenders but also help attract private sector investment into housing finance, expand mortgage accessibility and ultimately increase housing supply.

HDAN also reiterated its commitment to working with the Federal Government, the National Assembly, mortgage institutions and other stakeholders to strengthen Nigeria’s housing finance framework and promote sustainable homeownership.

Advertisement

The organisation urged policymakers to treat the issue as a national priority, emphasizing that improving the mortgage system is essential to addressing Nigeria’s huge housing deficit.

“Strengthening mortgage finance remains one of the most effective ways to expand homeownership, stimulate construction activities and drive economic growth in Nigeria,” the statement added.

HDAN therefore called on the Federal Government and financial sector regulators to urgently begin consultations towards establishing a Mortgage Guarantee Company that will support the long-term stability and growth of Nigeria’s housing finance sector.