CRDB Bank, the mortgage business leader, said yesterday that low-interest rates charged on housing loans and superior packages elevated them to a driver’s seat.
The bank started to issue housing loans almost two decades ago and said they kept on reducing interest rates from 18 per cent charged almost 20 years ago to currently 13 per cent.
Though, CRDB Secure Lending Manager, Ms Janerose Mwombela, said the interest rates and mortgage education and awareness are still challenging the business from expanding further.
“The loan interest rates are still high in the market. This backpedal efforts to lend further. Also mortgage education and awareness are still low in the society…people dislike to borrow, want to construct houses using own saving which takes time and painful,” she said.
CRDB is controlling 38.02 per cent of the mortgage business in the country and in the last two decades has not only lowered interest rates but also increase the loan repayment period from between five and seven years to 20 years.
A quarterly report issued recently by Tanzania Mortgage Refinance Company (TMRC) in collaboration with the central bank showed that demand for housing and housing loans remains extremely high as it is constrained by an inadequate supply of equitable houses and high-interest rates charged on housing loans.
“Most lenders offer loans for home purchase and equity release while a few offer loans for self-construction which continue to be expensive and beyond the reach of the average Tanzanians,” the report said.
The report showed that interests in mortgage loans improved from 22 – 24 per cent in 2010 to 15 – 19 per cent offered today, “market interest rates are still relatively high hence negatively affecting affordability”.
The report also said cumbersome processes around the issuance of titles–especially unit titles–continues to pose a challenge by affecting borrowers’ eligibility to access mortgage loans.
CRDB said it has improved its mortgage package by offering loans for housing construction, mortgage purchase, and equity release for both domestic and diaspora customers. The loans are insured.
The lender, which is leading the other 33 banks in the mortgage business by far, also upped the highest amount to be loaned to 1.0bn/-.
“The borrowers are salaried workers, business personals under a Jijenge scheme,” Ms Mwombela said. The scheme also permits those with the rental house to use them as collateral and means of loan repayment.
The CRDB’s Jijenge loan repayment can be done through monthly instalments or balloon payments – single instalment after receipt of pre-determined lump sum for instance terminal benefits.
Further, the report showed that the competition in the market has led to the emergence of other products that are impacting mortgage market growth as the products have favourable terms to mortgage products and are used for housing purposes.
As of the end of June, the mortgage market was dominated by five top lenders, who commanded 65 per cent of the market. CRDB was a market leader commanding 38.02 per cent of the mortgage market share, followed by Stanbic Bank (8.11%), Azania Bank (7.13%), NMB Bank (6.82%), and NCBA Bank (4.63%).
Generally, the country mortgage market slowed down to 1.24 per cent in the value of mortgage loans at the end of June compared to 1.41 per cent growth recorded in the previous quarter.