The managing director of HFC Bank, Mr Robert Le Hunte, has called on the government to consider a tax credit on the interest income on mortgage to encourage more uptake of mortgage facilities by customers.
Although there is currently tax incentive for customers who take up mortgage facilities, the institutions are still saddled with taxes which do not allow them to offer cheaper products to customers.
Currently, with interest rates of about 30 per cent on mortgages, it will take income brackets of about GH¢12,000 a month to qualify for a mortgage of about GH¢167,000 for 20 years. This does not enable many Ghanaian residents to buy houses which are hovering around GH¢200,000 and GH¢350,000.
“If institutions such as HFC are able to get some tax credit on the interest income on mortgages up to a certain limit of say, GH¢250,000, it means that the interest on the mortgage will not pay tax and they can pass it on to the customer,” he explained.
He said that could significantly reduce interest on the facility to about 20 per cent and allow many Ghanaians to qualify for mortgages.
“Yes, the government will lose some income from tax from the banks, but the benefit will far outweigh the loss as more people will quality to take mortgages.”
“The solution to the whole mortgage issue has to be an approach by all players, a multi-sectoral approach because we also have to work on getting developers to get houses at rates that are a little bit affordable to the Ghanaian.”
He said HFC had contributed to resolving the issue by building up a mortgage fund and expanding the service in all branches across the country.
HFC Bank, a subsidiary of the Republic Financial Holdings Limited of Trinidad and Tobago, believes a stimulation in the mortgage industry would provide a boost for the larger economy.
The bank, which posted a loss last year because it wrote off a large portion of doubtful debts alongside a large provision for its non-performing loans, has turned around the business this year into profitability.
The unaudited half-year results of the bank indicate a 9.16 per cent increase in profit after tax from GH¢15.7 million for the same period last year to GH¢17.14 million.
Impairment charges have improved from GH¢35.7 million last year to GH¢1 million this year, a position Mr Le Hunte explained meant the measures put in place to forestall high NPLs were holding.
The bank and its subsidiaries also have a better cash flow position this year compared to the same period last year due to its restructuring and retooling to better deal with market conditions.
Besides some new products, the bank is also running a deposit mobilisation campaign to attract more customers.