LOCAL MORTGAGE REGULATIONS AND POLICIES IN GHANA

Local Mortgage Regulations and Policies in Ghana

The mortgage market in Ghana plays a crucial role in addressing the housing deficit and supporting homeownership for a growing population. However, the sector faces various challenges, such as high interest rates, limited access to credit, and the need for more sustainable housing. Local mortgage regulations and policies are pivotal in shaping the accessibility, affordability, and sustainability of homeownership opportunities in Ghana.

This section explores the local mortgage regulations and policies in Ghana, discussing how they impact mortgage accessibility, housing finance, and overall economic growth in the country.

1. Overview of the Mortgage Market in Ghana

Ghana’s mortgage market is still developing but has seen substantial growth in recent years. The country’s mortgage sector is relatively small compared to its population size and housing needs, with fewer than 10% of Ghanaians owning a mortgage. The housing deficit, particularly in urban areas, is significant, and the government, in collaboration with financial institutions, continues to explore policies and regulations that can improve access to affordable housing.

However, the mortgage market in Ghana faces several constraints:

• High interest rates: The cost of borrowing in Ghana remains high due to the central bank’s monetary policy and the risks associated with lending.
• Limited access to long-term financing: Most financial institutions offer short-term loans, making it challenging for borrowers to afford the long-term commitment of homeownership.
• Lack of adequate infrastructure: There is insufficient access to formal property documentation and legal frameworks that would make it easier to access mortgage loans.

In response to these challenges, the government and regulatory bodies have introduced a variety of policies and regulations designed to stabilize and expand the mortgage sector in Ghana.

2. Key Regulatory Bodies in the Mortgage Market

A. Bank of Ghana (BoG)

The Bank of Ghana is the central regulatory authority responsible for overseeing financial institutions and ensuring stability within the banking sector. It formulates monetary policy, sets interest rates, and ensures that financial institutions, including those offering mortgages, comply with local regulations. The BoG has introduced several measures aimed at improving financial stability and making mortgage financing more accessible.

For instance, the Bank of Ghana has set requirements for commercial banks in Ghana to follow in granting mortgage loans, such as the need for proper documentation and the adherence to standard lending terms.

B. National Housing Authority (NHA)

The National Housing Authority (NHA) is responsible for the planning, development, and regulation of the country’s housing policies. The NHA’s role in mortgage policy includes working with private developers and financial institutions to provide affordable housing options for Ghanaians. It also plays a significant role in regulating the construction and approval of housing projects, ensuring that homes are built to meet environmental and safety standards.

C. Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) regulates capital markets, including mortgage-backed securities, and supervises the operations of the mortgage financing market. The SEC plays an essential role in ensuring that mortgage lenders and investors adhere to ethical investment practices, which helps create a stable mortgage market.

3. Key Mortgage Regulations and Policies

The Mortgage Financing Bill

The Mortgage Financing Bill is a legislative framework developed to regulate the mortgage market in Ghana. Its goal is to expand the mortgage market by introducing more accessible and affordable financing options, ensuring that banks and other financial institutions adhere to specific guidelines when offering mortgage loans.

Some of the main provisions of the Mortgage Financing Bill include:

• Creation of a Mortgage Guarantee Scheme: This is aimed at reducing the risk to financial institutions in the event of default by borrowers. It allows more Ghanaians to access mortgage financing by mitigating lender risks.
• Promoting Secondary Mortgage Market: The bill provides a framework for the development of a secondary mortgage market. This would allow mortgage lenders to sell their loans to other investors, thereby improving liquidity and making more funds available for future lending.
• Mortgage Insurance: The bill promotes the use of mortgage insurance to protect both lenders and borrowers from the risks of default and foreclosure.

B. The Land Title Registration Act

The Land Title Registration Act is another key policy that impacts mortgage lending in Ghana. One of the barriers to mortgage financing is the lack of proper land titles and ownership records, which create difficulties for banks in securing loans. The Land Title Registration Act aims to streamline the process of land registration and property ownership by providing a comprehensive database of land titles.

This law is vital in mortgage lending because it enhances the transparency and security of property transactions. By ensuring that properties have clear ownership records, financial institutions are more confident in offering mortgage loans, and borrowers are more secure in their property ownership.

C. The Real Estate Development and Investment (REDI) Fund

The Real Estate Development and Investment Fund was established by the government to provide low-cost financing to developers and investors in the housing sector. The fund supports affordable housing projects by offering favorable terms to developers. The goal is to make housing more affordable for the general public, particularly low- and middle-income earners.

By promoting the development of affordable housing, the REDI Fund indirectly boosts the mortgage market by ensuring a supply of housing that is within the price range of most potential homebuyers. This, in turn, helps increase the demand for mortgage financing.

4. Government Interventions and Incentives

A. The Affordable Housing Program

The government of Ghana has implemented several initiatives to address the nation’s housing deficit. One of the most notable interventions is the Affordable Housing Program, which aims to construct thousands of affordable housing units across the country. The government collaborates with private developers and financial institutions to make affordable housing available to low- and middle-income families. These homes are often designed to be energy-efficient and environmentally friendly, ensuring that they meet global sustainability standards.

Mortgage financing is an essential part of this program, as it allows eligible buyers to access home loans with more favorable terms. The government has also worked to subsidize some aspects of mortgage financing, such as offering reduced interest rates and longer repayment periods, which makes homeownership more accessible.

B. Interest Rate Subsidies

In efforts to make mortgages more affordable, the government has sometimes subsidized interest rates for homebuyers. The Interest Rate Subsidy Scheme is an example of such an initiative, where the government works with financial institutions to provide mortgage loans at lower-than-market interest rates. This has helped to alleviate the burden of high interest rates on prospective homeowners.

C. The Ghana Mortgage Fund (GMF)

The Ghana Mortgage Fund was established by the government to enhance access to housing finance for Ghanaians. The GMF provides funds to mortgage lenders at subsidized rates to encourage the provision of affordable housing loans to lower-income households. Through this fund, the government aims to make homeownership more attainable for the majority of the population.

5. Challenges Facing Mortgage Regulations in Ghana

While these regulations and policies have positively impacted Ghana’s mortgage market, several challenges remain:

• High Interest Rates: Despite efforts to reduce interest rates through subsidies, Ghana still struggles with high interest rates due to inflation and macroeconomic challenges. This makes mortgage financing expensive for most Ghanaians.
• Property Rights and Land Ownership: The process of securing land ownership titles remains cumbersome, leading to delays in property transactions and mortgage approvals.
• Limited Long-Term Financing: There is still a shortage of long-term financing options in the mortgage market. Most financial institutions provide short-term loans with high interest rates, which are often not ideal for homebuyers looking for affordable and long-term financing solutions.
• Awareness and Education: Many Ghanaians are unaware of the mortgage products available to them, and there is limited financial literacy regarding home loans and mortgage eligibility. This restricts the potential demand for mortgage financing.

6. Conclusion

Local mortgage regulations and policies in Ghana are essential for developing a sustainable and accessible housing finance system. While the government has made significant strides in addressing the country’s housing deficit through various programs, there is still work to be done in making mortgages more affordable and accessible to all Ghanaians. With continued efforts to streamline land registration, promote affordable housing, and subsidize mortgage interest rates, Ghana’s mortgage market has the potential to expand, supporting more citizens in achieving homeownership and contributing to the country's economic growth.