Home ownership is a coveted dream of almost every individual. Unfortunately, most people are
not able to see this dream to realisation due to financial constraints. The importance of mortgage
products cannot be undermined since they have proven to be overly reliable in helping provide
decent housing for low and middle income groups in many countries.
Despite the overwhelming impact of mortgaging, some countries are unable to tap into the most
reassuring means of housing finance. African countries are no exception to this since their
financial markets are characterised by high and volatile interest rates, short to medium term
lending, mortgage credit deficiencies, embryonic capital markets and a host of other factors that
discourage mortgaging. The situation is aggravated in Ghana where Mortgage debt to GDP ratio
stands at 0.5%, making it one of the least developed markets worldwide with a wide variation from
the African average of 15.7% (CAHF, 2014:84). Mortgage pricing determinants form the core
problem of Ghana’s low performing mortgage industry and the nature of the mortgage model
adopted for pricing has a long-term significant effect on effective mortgage demand.
The nature of the mortgage instrument acceptable for mortgaging varies from one country to the
other. In fact the socio-economic, political and cultural make-up of a country needs to be given
due consideration in adopting a suitable model for mortgage product offerings. This paper
understudies the potential of the Graduated Payment Mortgage in pricing and demand for
mortgage products. To achieve this, the study concentrates on middle income earners in Ghana
and examines their propensity to afford mortgage products characterised by graduated payments.
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The study further employed quantitative and qualitative methods of data collection from both
primary and secondary sources and adopted purposive sampling techniques.
The researcher gathered during the study that the unattractive nature of the Ghanaian mortgage
market stems from a myriad of intertwined problems. Typical of these are low income levels, high
interest rates, unwarranted socio-cultural stigmas on borrowing, high risk of default, expensive
mortgage products and high incidental costs.
Regardless of the difficulties of mortgaging in Ghana however, the study reveals that many
prospective home owners are willing to accept cheaper mortgage finance products in lieu of
incremental development approaches to housing. They expressed particular interest in the
graduated payment model which allows for low initial repayments that increase at an agreed
percentage over the term of the mortgage loan. Unrealistic assumptions, unpredictable economic
trends, long term mortgage credit deficiencies and slow build-up of equity are the major
challenges that were identified as capable of stifling the success of graduated payment mortgages
in Ghana