An investigation into selected factors hindering access to mortagage finance in Kenya

Abstract

The Kenyan mortgage market has been experiencing slow growth despite the upsurge of housing prices over the last few years. All commercial banks offer mortgage finance but still only a small percentage of Kenyans have used mortgages. The objective of this study was to establish the factors that hinder investors from accessing mortgage finance in Kenya. It assesses the effect of income level, property registration, mortagage cost and mortgage information on access to mortgage finance. The study involved a census survey of all the 44 commercial banks in Nairobi as published by the Central Bank of Kenya. The study used descriptive research that presented the results by use of graphs, tables and pie charts. Primary data was collected through issuing questionnaires to the credit analysts in these banks at their head offices in Nairobi. Credit analysts have more information about access to mortgages as they are involved in appraisal of all applications before any approvals are made. These questionnaires were then collected at a later date. Data analysis was done through a regression equation which analyzed the relationship between the factors and access to mortgage finance. The results showed that, the most important factor affecting access to mortgage finance was income level, a low income level increases the chances of defaulting in repayment and also determines affordability to meet the monthly payments. Therefore, high income investors formed the majority of applicants for mortgages. For the cost of mortgage factor, the majority of mortgage applicants require fixed rates of interest. For the property registration, without a title deed, one cannot obtain a mortgage due to lack of collateral for the mortgage. Finally, mortgage information also affects access to mortgage finance but to a little extent. The study recommended for banks to change the design mortgage products with low repayments for the low income groups which would enable them access mortgage. The government should form efficient policies in registration of properties and issue of title deeds to support the mortgage market.