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Housing Finance Market Overview
In Ghana, mortgage loans are available to homebuyers from banks, building societies and one specialised non-bank mortgage lender. The Housing Finance Company Bank (HFC) - a hitherto non-banking financial institution which is now a full-blown universal bank - and Ghana Home Loans (GHL) - the single specialized mortgage provider - are the largest mortgage lenders in Ghana. The mortgage market in Ghana remains rudimentary but outstanding mortgage loans to customers for the purchase of residential property have increased tremendously due to improved macroeconomic and legal conditions. The ratio of mortgage debt outstanding to GDP grew from 2.5 per cent in 2004 to 3.9 per cent in 2006; an average annual growth rate of 25 per cent.
The Market from the Perspective of the Demand Side
In Ghana, the usual maximal loan-to-value (LTV) ratio is 85 per cent. Mortgage products with variable or fixed interest loans are available as well as denomination in national or foreign currency.
House Price Development
There is no reliable source for house prices in Ghana. Yet, growing demand and insufficient supply support the assumption of increasing house prices in the last years.
Special Characteristics of the Market
The HFC was created in the 1990s with the help of the World Banks Group and started with the vision of becoming a secondary market company. However, the banks did not enter the mortgage lending business due to unfavourable legal and macroeconomic conditions as well as no financial institution agreed to sell the few residential mortgages they had to HFC. In order to stay competitive HFC became a primary mortgage issuer and the only significant mortgage lender in the housing market for more than a decade until 2006 when the Ghana Primary Mortgage Market Initiative was launched with the help of the International Finance Corporation (World Bank Group) in order to jump start the mortgage market in Ghana.
Deposits as well as lines of credit offered by international (development) institutions are the main source of funding for the mortgage market activities of banks . HFC and GHL can also refinance by turning to funding facilities offered by partners and/or (development) institutions. Yet, HFC raises most of its financing by issuing bonds.