Safeguards sought to keep homeownership within reach amid rising borrowing costs

MANILA, Philippines — The Bangko Sentral ng Pilipinas’ recent 50-basis-point interest rate hike to 5.50% could further push homeownership out of reach for Filipino families, especially as credit terms tighten amid growing risks of stagflation in the country, a lawmaker warned.

Rep. JP Padiernos, a member of the House Committee on Banks and Financial Intermediaries, emphasized that higher borrowing costs add severe pressure to an already struggling residential property market, particularly amid concerns over slowing economic growth and persistent inflation. He said this could further constrain household purchasing power and access to housing finance.

S&P Global Ratings recently warned of the country’s worsening macroeconomic backdrop, pointing to a sharp slowdown in first-half 2026 GDP growth to just 2.6% alongside October inflation surging to a near four-year high of 7.8%. The rating agency projects full-year 2026 GDP growth to reach a modest 2.9%, with annual inflation averaging 5.5%.

With high oil prices and a strong El Niño pattern expected to drive food costs higher, S&P expects consumer spending to weaken further and squeeze household budgets through the first half of 2027. Consequently, the central bank is anticipated to keep interest rates higher for longer to contain persistent price pressures, even if supply-side relief eventually limits additional policy rate hikes.

“For families planning to buy a house or condominium through a bank loan, the BSP’s rate decision raises serious concerns about affordability, particularly as stagflationary pressures, rising food, electricity, fuel, and transportation costs, continue to erode household purchasing power,” said Padiernos.

Rep. JP Padiernos

While the BSP’s benchmark policy rate does not automatically yield an identical, immediate increase across all commercial housing loans, Padiernos noted that higher benchmark rates directly influence banks’ underlying lending costs and repricing schedules.

“The BSP has an important role in maintaining price stability, which is essential to protecting the purchasing power of Filipino families. At the same time, we must examine complementary measures to ensure that higher borrowing costs do not further limit access to affordable housing,” Padiernos said. “When mortgage rates escalate precisely as basic necessities consume a larger share of disposable income, homeownership becomes vastly more difficult to achieve.”

The pressure on domestic real estate demand was evident even prior to the BSP's policy tightening. Data from real estate consulting firm Colliers Philippines revealed that net take-up of Metro Manila condominiums dropped to just 500 units in the second quarter of 2026, a 60% decline from the previous quarter and the lowest quarterly performance in five quarters.

Colliers also observed a clear shift toward lower-priced inventory: condominiums priced between P1.8 million and P3.6 million accounted for 67% of total net take-up in the first half of 2026, up from 33% in the same period last year. This trend underscores a tightening constraint on buyer affordability across Metro Manila.

To navigate the high-interest, high-inflation landscape, Colliers urged property developers to reevaluate selling strategies and structure more flexible, extended payment arrangements, particularly for residential units priced between P2.5 million and P12 million.

Padiernos called on financial institutions and government policymakers to develop targeted, accessible housing finance programs for middle- and lower-income first-time buyers to cushion the impact of prolonged monetary tightening.

“For Filipino families, the central question is whether financing and housing options will remain attainable as monetary policy stays tight to combat inflation,” Padiernos added. “For policymakers and the property sector,the immediate challenge is maintaining financial stability without completely closing the door on affordable homeownership.” (Contributed story)