Credit extended to the private sector grew by 2.8% y/y in February, compared to 2.7% y/y in January according to latest data from the Bank of Namibia (BoN).
Net household debt according to BoN, increased by 2.9% y/y in February, whereas net corporate debt increased by 2.7% y/y in February supported by higher demand for asset backed credit facilities by corporates in the fishing, transport and financial services sectors.
“Household debt has been increasing by 5.1% on an annualised basis in the last 5 years, compared to 3.9% for corporate debt. We consider a household buying a N$2 million house for a 20-year term. The current average mortgage rate is 8.75% and we forecast a 125bps rate hike by the end of 2022. If mortgage rates increase to 10%, monthly repayments will increase by 9.2% (from N$17,674 to N$19,300). How many families will be able to afford this increase, coupled with rising fuel and food prices putting a strain on household budgets,” Simonis Storm Economist, Theo Klein said.
“Credit extension remains far below its long run average of 11.5% (average calculated for the 2003 to 2021 period). While we forecast 2.5% GDP growth for 2022, we believe that demand for credit will largely remain subdued. We forecast an average monthly credit extension of 1.7% in 2022.”
