Ghana’s mortgage market is failing due to high interest rates, economic instability, a 1.8 million housing deficit, and inaccessible loans, hindering homeownership.
Ghana’s mortgage market is struggling to meet the housing needs of the citizens, with a severe housing deficit estimated at 1.8 million units. Despite government initiatives and private sector efforts, high-interest rates and economic instability are stifling mortgage accessibility. The average commercial lending rate reached 31.66% in April 2023, making homeownership unattainable for many Ghanaians who earn an average monthly income of just GH¢2,828 (approximately US$257) .
The lack of a secondary mortgage market further complicates the situation, as lenders are unable to manage risk effectively. Most mortgage providers favour US dollar-denominated loans due to the volatility of the Ghanaian cedi, where interest rates can soar to 29.8% for local currency loans compared to 13.5% for dollar loans. This preference limits options for borrowers and increases their financial burden, especially when currency fluctuations can significantly impact repayment amounts .
Additionally, the construction sector faces a staggering non-performing loan (NPL) ratio of 32.8%, reflecting broader economic challenges that hinder housing finance. High costs of construction materials—largely imported worsen affordability issues, with new two-bedroom homes starting at GH¢400,000 (around US$36,430). Such prices place homeownership out of reach for most households, leading to an increase in vacant housing units from 6% in 2010 to 12.7% in 2021 .
Government programs like the National Homeownership Fund (NHF) and the National Mortgage Scheme (NMS) aim to provide lower-interest mortgages and support developers. However, these initiatives have not sufficiently addressed the fundamental issues of affordability and access. The bureaucratic hurdles involved in land registration and property rights further deter potential homeowners and investors from engaging with the mortgage system .
Innovative projects like the Lahagu Affordable Housing Project offer some hope by employing cost-effective construction methods that reduce expenses while promoting sustainability. Yet, without systemic reforms in the mortgage market and a focus on securing land titles, these efforts may only scratch the surface of a much deeper crisis.
To effectively tackle Ghana’s housing challenges, a multi-faceted approach is essential. This includes enhancing financial reform, improving legal frameworks for land ownership, and fostering public-private partnerships that prioritize affordable housing solutions. Without important investment in these areas, the dream of homeownership will remain elusive for many Ghanaians, perpetuating a cycle of poverty and inadequate living conditions .
