Bank lending for housing in Mozambique lost further ground in July, falling to its lowest level in at least a year. In a single month, financing for this segment contracted by 4.1%, to 7.189 billion meticais (€98 million), according to data from the Bank of Mozambique.

The central bank’s latest statistical report shows that the stock of housing credit fell from the 7.495 billion meticais (€102 million) recorded in June. Compared with July 2025, when it stood at 8.393 billion meticais (€114 million), the decline is even sharper, at 14.3%.

The figures confirm the limited weight that housing finance continues to have in Mozambique’s banking system. In July, this type of credit accounted for just 2.5% of the 291.666 billion meticais (€3.963 billion) lent by banks to the economy.

The contraction comes during a period marked by a gradual decline in interest rates over the past two years. Even so, the cost of borrowing remains high, particularly for long-term loans, as is typically the case with home purchases.

According to the Bank of Mozambique, the average rate charged on loans with a one-year maturity stood at 21.27% in July, down from 23.04% in the same month of 2025.

For households seeking bank financing to buy a home, conditions remain equally demanding. Housing loan products offered by commercial banks require substantial guarantees, including a mortgage on the property and compulsory insurance.

Depending on the financial institution, the amount financed is generally limited to between 80% and 90% of the property’s purchase price or valuation.

Earlier data from the Housing Finance Information Network help illustrate the small scale of this market in the country. Mortgage lending in Mozambique represents less than 1% of Gross Domestic Product (GDP), a low proportion by international standards and one that reflects the difficulties in accessing formal financing for home purchases.

Credit developments are also taking place against a backdrop of reductions in the main benchmark rate used by the banking system. The prime rate remained at 15.5% in October for the sixth consecutive month, following three earlier cuts during the year, according to information previously released by the Mozambican Association of Banks (AMB).

Since January 2024, the benchmark rate has followed a downward trajectory, after remaining at a peak of 24.1% for six consecutive months.

In January this year, the AMB cut the prime rate by 10 basis points to 15.70%. The rate remained unchanged in February, despite the Bank of Mozambique’s decision during that period to lower its monetary policy rate.

Further cuts of 10 basis points were made in March and April, bringing the banking benchmark rate to its current level of 15.5%, where it has remained stable since May.

Movements in the prime rate are linked to the monetary policy interest rate — the MIMO rate — set by the Bank of Mozambique, which forms part of the formula used to calculate the benchmark rate applied by commercial banks. The MIMO rate is one of the central bank’s main instruments for influencing monetary conditions and controlling inflation.

In September, the Bank of Mozambique decided to keep its monetary policy interest rate unchanged at 9.25%.

Source: Lusa