The cost of mortgage finance measured by the prevailing mortgage lending rate in Ghana has been revealed to be one of highest in Africa outpacing the country’s real estate and economic peers such as South Africa, Kenya, Nigeria, Botswana, Mauritius, Egypt, among others.
This is according to a report published by the Centre for Affordable Housing Finance in Africa (CAHF), the continent’s most credible affordable housing finance advocate, explaining that the average lending rate of commercial banks in Ghana in 2020 was around 20.1 percent.
“With an underdeveloped financial market, the cost of capital for the construction and housing sectors is exorbitant.
“Annual interest rates on Ghana Cedi-denominated mortgages ranged from 18.7% to 31.7% in 2019. US dollar-denominated mortgages have comparatively lower interest rates, ranging from 11.4% to 15%. In 2020, the central bank’s annual average monetary policy rate, as a signal of the business risk, was 15.25%. On the other hand, the average annual commercial lending rate by the banks stood at 22%.8,” the report observed.
The study found that on average, Ghana’s residential mortgage lending rate for a 20-year mortgage is 17 percent as opposed to 11 percent, 10 percent, 16 percent, 9 percent, 7 percent and 9 percent for Kenya, Mauritius, Nigeria, South Africa, Egypt and Botswana respectively. Interestingly, Zimbabwe and Zambia’s prevailing residential mortgage rate flies around 50 percent and 30 percent respectively with Burkina Faso and Algeria reporting average mortgage lending rate of 7 percent each. Libya has the least prevailing residential mortgage lending rate on the continent with 5 percent.
The Centre for Affordable Housing Finance in Africa noted that several factors limit householders’ access to home finance in the country aside from the high-interest rates and associated transaction costs, adding that lenders tend to have more stringent qualification requirements on mortgages and conduct extensive due diligence vis-à-vis other lending portfolios.
“Mortgagees may also have conditions on the towns or cities where residential properties must be located, with a preference for gated estates, primarily those within the Greater Accra and Greater Kumasi Metropolitan Areas. Mortgagee banks, except for the Ghana Commercial Bank, operate in predominantly large urban areas,” it explained.
The Centre in concluding observed that the establishment of the National Housing and Mortgage Fund by the government in partnership with some banks to enhance access to mortgage financing and stimulate housing development is expected to yield much better results.
Source: Mohammed Bomanso Issah (Real Estate Times Africa)