The Deputy Finance Minister, John Kumah, at a three (3)-day workshop in Koforidua for stakeholders in the housing and mortgage sector on Wednesday, August 11 indicated that the government had reduced Ghana’s mortgage interest rate by 60%, through the implementation of the National Mortgage Scheme (NMS) under the National Homeownership Fund.
According to the Deputy Finance Minister, the rate had been downsized from the 24 percent average market rate to 10 to 12 percent by participating banks such as, GCB Bank Limited, Stanbic Bank Ghana Limited, and Republic Bank Ghana Limited. This, he said was in an effort to make homeownership affordable to citizens.
How the mortgage rate will affect homebuyers?
The mortgage rate refers to the interest charged by a lender or financial institution that gives you the loan to purchase your home. It simply reflects how much you’ll pay to take out the loan. So, for example, if a bank quotes a 10% fixed mortgage rate on a GH¢500,000 loan, you will pay 10% of your loan balance every year until you sell the home or pay off the loan.
During this period of COVID-19 where many are still grappling with financial losses and scrambling for little job opportunities, Governments across the globe are trying to ensure their citizens are able to afford one of life’s necessities, shelter (home). In May of 2020 for instance, the interest on a 30-year home loan in the United States was 3.24%.
With the government slashing down Ghana’s mortgage interest rate by 60%, homebuyers can now purchase their homes with lower monthly payments. This may present an opportunity for those with good income standing and are seeking the right time to purchase a home.
In the bid to help millennials, the Deputy Finance minister has called on the government to also review the repayment plans of the mortgaged homes from 20 to 40 years, especially for young graduates who are not yet financially stable.
Developments in the Mortgage Sector
In a separate development, some pension providers have also taken steps to bring such mortgage services to the public. The new pension law. ACT 766, permits an individual to assign their pension benefits (2nd & 3rd tier) to a mortgage lender upon acquisition of a primary mortgage.
Due to the capital intensive nature of acquiring or building a real estate, acquisition has been placed beyond a larger part of the population. However, banking on people’s accumulated pension fund is a proven and credible way to bridge this gap. GTB will provide further insights into the mortgage sector in subsequent articles.