Banks reduce mortgage loans over high NPLs – BoG

Banks have begun tightening their stance on mortgages due to the rise in their Non-Performing Loans (NPLs).

At least according to the Bank of Ghana’s latest banking sector report, the commercial banks decreased their loans for house purchases by some two percentage points from 8 to 5 percent as at June this year.

The position by the commercial banks according to the Bank of Ghana’s banking sector stability report comes despite the increase in demand for loans for house purchases by households.

At least the report indicates that the demand for loans for house purchases went up marginally from 5 to 6 percent between April and June this year.

However, the commercial banks largely attribute their tightening in loan levels to the rise in their non-performing loans which went up by 31 percent; from 6.09 to 7.96 billion cedis as at the end of June this year.

According to the central bank, total loans offered by the banks locally, grew by 3 percent to 37.51 billion cedis in June.

This also came after an 8 percent contraction in the same period last year. Unlike the real credit to the private sector which equally went up by 2.6 percent after recording a negative growth rate of 8.2 percent a year earlier, credit to households contracted by 0.7 percent in June 2017 compared with a 2.3 percent contraction in June 2016.

But it is interesting that this reduction in loans for house purchases by the commercial banks come at a time that mortgage houses are announcing a reduction in cost of cedi mortgages.

The CEO of Ghana Home Loans, Mr. Dominic Adu earlier told Citi Business News that the stability of the cedi has led to over a forty percent reduction in cost of cedi mortgages.

Meanwhile the average interest on mortgages by commercial banks remained at 33.1 percent between June and July this year.