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HousingMon, 24 Jan, 22

Ghana’s Unpaid Residential Mortgage Continue To Rise Because Of High Lending Rate

Ghana’s Unpaid Residential Mortgage Continue To Rise Because Of High Lending Rate

The Center for Affordable Housing Finance has indicated in the Africa Housing Finance Yearbook 2021 the outstanding value of Ghana’s residential mortgages accruing to a whopping US$566.85 million.

It is believed that Affordable housing in Ghana continues to be an urgent socio-economic concern despite the growing economy, as incomes fail to match house price increases.

The Center attributed the over dominance of the banking sector on the Ghanaian financial services and the lack of active capital markets as the main barriers to long-term housing finance in the country.

“The banking sector dominates Ghana’s financial services, while the pension, insurance, and capital markets are less developed. This has contributed to the limited availability and high cost of long-term wholesale finance for banks,” CAHF said.

It added that domestic credit to the private sector as an indicator of the level of financial development in Ghana is lower than that of Sub-Saharan Africa (excluding high-income countries) of 17.2%.

With an underdeveloped financial market, the center said, the cost of capital for the construction and housing sectors is exorbitant. “The average lending rate of commercial banks in 2020 was 20.17%. Nine of the current 23 banks in the country have official mortgage products including home purchase, home improvement, equity release, home construction and land purchase.”

Also, home purchase mortgages typically have a loan to value ratio of 80% with amortisation of 15 years, although some banks such as the First National Bank offer 100% mortgages. 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%.”

Meanwhile, the government has proposed several affordable housing interventions, including resuscitating initiatives that were stalled at various stages of development in the country.

It is expected that by 2022 the stalled housing developments in the country and the controversial Saglemi project would have been completed, in addition to 150 new housing units to be provided for public officials.

However, Affordability remains an issue because of prevalent low household incomes, restricting access to shelter, be it ownership or rental.

 

Source: Abdul-Razak Mohammed(Real Estate Times Africa)

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