Mortgage Financing and Affordable Housing Nexus: Evidence from Developing Countries

Abstract

The study investigated the relationship between mortgage financing and affordable housing in Kumasi, Ghana. It explores how mortgage financing influences affordable housing supply. It identified 23 banking institutions of which 11 of them are into mortgage financing. Adopting the exploratory sequential mixed method research design, the study selected banks households and, realtors as respondents using both purposive and accidental sampling techniques. The study found that, in Kumasi and Ghana, housing is affordable on paper but very expensive on the ground as none of the houses supplied on affordable housing projects are affordable to middle- and low-income earners. The study acknowledged that the high level of LtVR has made mortgage financing very expensive to ordinary Ghanaians and such calls for government-insured mortgages to make housing supply less expensive. It found that the ANOVA results from a regression analysis with a multiple R of 0.240 and R square of 0.058 shows that only 5.8% of the total mortgage lending rates are influenced by the interest rate pegged by the Bank of Ghana (BoG) and hence there is a very weak relationship between interest rate and mortgage lending rate in Ghana. The study concludes based on the findings that in Kumasi and Ghana, housing units that are supplied using mortgage financing by the government realtors are more expensive than those built by private estate developers with or without mortgages. Hence a complete reform of the mortgage policy to include government-insured mortgages to make the secondary mortgage market attractive was recommended.