Mortgage Financing Constraints and Housing Sector Development in Kenya

Abstract

The Kenyan mortgage market has experienced slow growth over the last few years despite the upsurge of mortgage payments. CBK, 2020 Banking report shows that Mortgage uptake in Kenya has remained relatively low with the number of mortgage accounts at 26,504 against a total adult population of approximately 23 million people. Affordability is a major constraint to the growth of the housing and mortgage markets, and a key challenge to accessing decent housing in Kenya. According to the 2019/20 Kenya Integrated Household Budget Survey (KIHBS), only 21.3% of Kenyans living in urban areas own the homes they live in. The study adopted descriptive research design. Correlation analysis was used in determining the extent of the relationship between the study variables a multivariate regression analysis was employed to determine the association between the outcome variable the predictor variables. ANOVA was used to test for significant differences between means. From the results of the study Inflation and Housing sector development has a strong positive correlation (r=.868) while Interest rates and Housing sector development has a strong positive correlation (r=.920). The model shows the value of R square is 0.851 which indicates that 85.1% of the changes in Housing sector development are caused by changes in inflation and interest rates. The study therefore recommends that there is need for policy makers to regulate the inflation level prevailing in the country and the government through the Central Bank of Kenya and mortgage lending institutions should also implement policies that reduce the interest rates that financial institutions charge on mortgage loans.