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Julia Kigomo - Kenya Methodist University, Kenya


The mortgage market in Kenya is relatively small compared to international standards having only 15,803 loans. The growth rate has been low since 2006 though with a steady growth of 14% annually but still the growth is below 50%, therefore the loan portfolio remains small. In terms of mortgage debt to GDP ratios, Kenya’s ratio is low by international standards. the mortgage debt to GDP ratio is around 50% in Europe and over 70% in US.  Kenya’s mortgage debt compared to its GDP is better than its East African neighbors, Tanzania and Uganda at just under 2.5% this is an indication that there is still a room to grow for East African countries and more so Kenya which has low mortgage uptake. While the mortgage markets in the United States and Europe have been studied extensively by academics and other researchers around the world, markets outside the U.S. and Europe generally gain much less attention. Particularly, the structure and other institutional aspects of the mortgage markets outside the U.S. and Europe attain a very attention. This study intended to establish the factors behind the low mortgage uptake. The study had the following specific objectives: to determine the influence of mortgage interest rates on the uptake of mortgages; to establish the effect of incomes on the uptake of mortgages; to identify the effect of credit risks of borrowers on the uptake of mortgages, and; to establish the effect of availability of mortgage financiers on the uptake of mortgages. The study design was descriptive survey. This involved surveying various respondents to find out the factors which contributed to uptake of mortgages. In this study, the population was customers who had taken or was in the process of taking a mortgage from one of the Kenyan mortgage lenders. The sampling technique employed was snowballing which started with a few mortgage borrowers who introduced others. The primary data was collected by means of self-administered questionnaire. The collected data from the questionnaires was analyzed using descriptive statistics for quantitative data and content analysis for qualitative data. Presentation of the analyzed data was in form of tables and graphs. The findings from the study indicate that income levels had the greatest effect on uptake of mortgages followed by interest rates and other mortgage costs. The third most important factor affecting uptake of mortgage was unavailability of credit data and high credit risks. The least important factor affecting mortgage uptake was availability of mortgage facilities and institutions. From the findings of the study, the following recommendations are made. First, low cost housing should be developed to cater to those who cannot afford current mortgages. Mortgagees should also lower mortgage costs to incorporate more customers into the bracket of those who can afford. The study also recommends the mortgagees and the credit risk bureau to improve risk management and efficiency in their operations. Lastly, it is recommended that the players in the market including CMA, NSE and the various stakeholders should develop a secondary mortgage market. 

Full Length Research (PDF Format)