![[Ghana] Sluggish economy takes toll on mortgage uptake, banks](HFC.JPG)
[Ghana] Sluggish economy takes toll on mortgage uptake, banks
Banks, offering mortgage loans, have blamed the general slowdown in economic activities and a weak purchasing power among Ghanaians, as reasons accounting for the decline in the demand for mortgage loans.
They argue, the development has also increased the cost of mortgages making it unattractive to prospective home buyers. The assertions come on the back of a recent Bank of Ghana (BoG) report which shows that demand for mortgages in July 2016, dropped to minus 5 percent. This comes despite an ease in access to credit by the banks for the period.
“For mortgages it takes a while; the house has to be ready, you register your documents, among others so there’s a path line but the thing is that the cost of the properties themselves are high incomes are low so people are not able to afford.
It’s now an affordability issue, we have always had an affordability issue,” a General Manager at HFC Bank, Charles Bonsu stated. The latest Annual Percentage Rates (APR) and Average Interest (AI) report also shows that mortgage rates have gone up marginally as at the end of September.
According to the report, the average interest on home loans among commercial banks has increased from 30.6 to 31.5 percent between May and September 2016. The BoG’s report further intimated that the decline has been for the past eight months from December 2015 to July 2016.
Though some fear the development could threaten Ghana’s ability to reduce the housing deficit gap of 1.9 million, Charles Bonsu allayed fears of an imminent collapse of the mortgage industry. He explained, there is still a relative high demand for high end mortgages despite the shrink in demand for middle and low-end housing loans.
“What you will realize is that there’s a lot of work going on in the high market. If you look around Accra you see a lot of apartments coming up you see a lot of high earned properties coming up so there’s a lot of work going on in the high end of the market but when you come to the middle income and below that, the market has shrunk.”
Banks demand tax cuts on home loans Banks in the country have made calls for government to slash taxes slapped on them to be able to offer cheaper mortgage loans to their customers.
They argue that the continuous imposition of taxes on interests earned on mortgages, make it difficult for them to reduce interests for the average Ghanaian to access mortgage services.
“If institutions like HFC are able to get some type of tax credit for the interest income; for instance if the government would say interest income on mortgages under $63,000 is tax free, it will mean that for the interest that HFC earns on mortgages under &63, 000, it will not have to pay tax on that income…slashing the taxes will help banks to also contribute better to the mortgage industry,” the Managing Director of HFC Bank, Robert Le Hunte asserted.
