GREDA Pushes for Secondary Mortgage Market To Make Home Loans Affordable & Accessible

Perhaps one reason why affordable housing continues to remain a mirage for many average Ghanaians is a lack of a proper and developed mortgage financing scheme in the country.

The housing deficit in the country is in excess of about 1 million while average Ghanaians are forced to rely on rented houses and apartments which continue to rise in cost due to rapid urbanization and limited housing supply.

Mortgage financing, which is a major means for the average income earner to own his/her own house remains underdeveloped. Mortgages in Ghana are characterized by high interest rates, short repayment periods, and limited access for the average Ghanaian.

This makes monthly repayment unaffordable for most Ghanaians especially those in the low and middle incomes brackets. 

This situation, the President of the Ghana Real Estate Developers Association (GREDA), Patrick Ebo Bonful believes is partly attributable to the lack of a secondary mortgage market in Ghana.

A secondary mortgage market is an arrangement that allows financial institutions to sell the home loans (mortgages) they have already given to people. With this market, the bank can sell a mortgage to another company or an investor to get back the money lent. The bank can then use the money to give more mortgages to other people.

The real estate developer says the lack of this kind of market in Ghana has significantly limited the ability of banks to provide affordable housing finance to the average Ghanaian. In the absence of a secondary mortgage market, financial institutions are forced to hold onto mortgages for the entire loan term. This, Patrick Ebo Bonful says ties up the bank’s capital for years hence limiting its capacity to issue new mortgages to other people.

This limits the number of people who can access mortgages hence resulting in home financing becoming scarce, expensive, and mostly accessed by high-income earners pushing out the average Ghanaian.

Given this situation, the President of GREDA is championing a campaign for the introduction of policies and laws to develop mortgage financing in the country to establish such a secondary market.

“There should be the implementation of new policies and new regulations to engender finding other financing options that are available on the market,” Patrick Ebo Bonful maintained.

He explained that: “We don’t even have a secondary mortgage market in this country. When banks write mortgages, they don’t have anywhere that they can offload the books of the mortgages that they have written, they have to sit with it. If it is a mortgage of ten years or twenty years, they must sit with it for ten years. However, if you have a secondary market, what they can do is sell off to the secondary market, recoup their money, come back to the primary market, and provide more mortgage financing for everyone.”

“We need this kind of cycle to work and we need a proper and strong regulatory framework to help us achieve that,” he added. 

Source: The High Street Journal