Cost of Fund as a Determinant of Customers Loan Preference between Federal Mortgage Bank of Nigeria and Primary Mortgage Banks

High cost of fund has constituted a serious issue that discourages borrowers from accessing funds for housing development. The main objective of this study is to examine finance cost as determinant of customer loan preference between Federal Mortgage Bank of Nigeria (FMBN) and Primary Mortgage Banks (PMBs). The study employed survey design method. The population size was 329,826 and the sample size of 400 respondents from the total population was determined using Yomens (2000) formula. The study adopted questionnaire as a primary source for data collection. The data obtained were analysed using descriptive and inferential statistics. Pearson Correlation with the aid of SPSS Version 25 and the results presented using tables and figures. The result showed 0.996 (strong positive) correlation coefficient (r) between NHF loan 6% interest and NHF loan affordability compared to PMBs at significant level (p=value) 0.000, which was smaller than the significant level   α-value (P<0.05). This means that NHF Scheme loan interest rate fixed at 6% per annum by FMBN is the only single digit housing loan servicing interest rate and the cheapest rate obtainable in the housing finance market. The study concluded that finance cost was a determinant of customer loan preference. Customers are always ready to accept a lower interest rate of 6% offered by FMBN compared to 18-23% commercial interest rate provided by PMBs. The study recommends that FMBN should embark on aggressive NHF mobilization drive to widen the net of NHF Contributions’ base with a view to increasing the number of its mortgage financing and sustainability of the 6% interest rate to their customers.