New figures released by the Bank of Ghana (BoG) reveal demand for loans for house purchase by customers of banks have reduced despite an ease in credit access by commercial banks.
Banks in July 2016 eased their credit stance to households for house purchase and consumer credit.
Despite the move demand for mortgages saw a decline that month. During that month demand for mortgage loans hit about minus 5 percent in net percentage, the lowest demand recorded within eight months from December 2015.
Demand for mortgages also reduced between December 2015 and February 2016 hovering between minus 3 percent and minus 1 percent. Demand for mortgages however picked up in March this year inching up to about 4 net percentage points in April, 2016. This declined in May and continued to decline in June and in July this year.
It’s unclear why demand for loans for house purchase by customers of banks have reduced despite an ease in credit access by banks but an earlier report released by the central bank on average interest and Annual percentage, showed interest on home loans increased marginally from 30.6 to 31.5 percent between May and September this year.
The report which surveyed 29 banks who offer home loans showed that Ecobank offered the least rate for a mortgage at between 19 and 29.3 percent. At the second position is GCB Bank whose mortgage rate as at May, 2016 was between 21 and 31 percent. At the third position is Societe General with between 22.0-30.0 percent.
Stanbic bank comes up at number with a rate between 23 to 32 percent. Bank of Baroda which previously offered the cheapest rate on home loans now places fifth at 28.8 percent. Zenith bank at number six at 29 percent.
New entrant, Sovereign bank comes up at number 7 with its interest on home loans at 29-29.3 percent. At the 8th,9th and 10 positions are HFC Bank, ADB bank and FBN Ghana with 29.7 -30.3 percent;30.75 and 32.8 percent respectively.
At number 11, is UT bank at 32.1 to 35.1 percent. While Energy Bank placed 12th with its at 33.4 percent, Prudential bank placed 13thwith its mortgage rate at 33.6 percent. Cal Bank and Barclays Bank follow with mortgage rates 40.1 percent.
The Royal bank between 35.5 and 40.5 percent. Bank of Africa 36.6 percent while Sahel Sahara’s mortgage is at 38.1 percent. Unibank has the highest mortgage rate of 45.1 percent.
Meanwhile, Access Bank, First Atlantic Bank, Capital bank, Fidelity bank, First National Bank, GT Bank, NIB, GN Bank, Stanchart and UBA do not offer mortgage 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 ¢250,000 is tax free, it will mean that for the interest that HFC earns on mortgages under ¢250, 000, it will not have to pay tax on that income. But that is not the case as such, the high interest is a way that the financial institutions could pass on that tax, slashing the taxes will help banks to also contribute better to the mortgage industry.
If for example, the taxes are reduced, you can see the mortgage interest rate declining from about 50% to about 20 %,” he stated.
Managing Director of HFC Bank, Robert Le Hunte told Citi Business News. Currently, interest rates on mortgages which hovers around 31.5 is clearly a disincentive for customers to access credit.
The situation is said to be impacting hugely on the country’s ability to solve its 1.7 million housing deficit gap which is also anticipated to increase to about 1.9 million by 2019.
Banks over the years have cited the uneasy accessibility to mortgages; short-term nature of funds that banks receive to fund mortgages and the high-interest rates as some critical challenges confronting Ghana’s ability to bridge the widening housing deficits.
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