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Kenya’s mortgage market still underdeveloped despite high demand for houses

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By Ben Kinynjui

Kenya’s mortgage market has witnessed an impressive growth in the last decade but the number of loans are till very low mainly due to scanty information available to potential buyers.Housing minister Soita Shitanda says high interest rates hurting sectorHousing minister Soita Shitanda says high interest rates hurting sector

Experts say the prevailing high interest rates as a result of a stringent monetary policy being pursued by the Central Bank of Kenya in an effort to fight high inflation have dampened the market.


“A greater proportion of the new housing stock that came to market in 2011 was reachable by mortgaged buyers than in any previous year, at 38 per cent of new-builds, compared with 34 per cent in 2010,” says Ms Carole Kariuki Managing Director of the Mortgage Company.

“The mortgage market has increased from 7,600 homes in 2006 to 20,000 homes in 2012 but the recent hike in interest rates has slowed down mortgage uptake by more than the entire house price boom and tripling in house prices.”

Ms Kariuki however says it is still possible to get mortgages at well below prevailing rates, with mainstream mortgages ranging from 19 per cent to 28 per cent and secondary mortgages available for 14 per cent.

“With now 38 per cent of the new housing coming to market reachable for mortgage buyers, and mortgage offerings having ballooned in recent years, the mortgage market offers the chance of home ownership to tens of thousands of Kenyans.

“But potential buyers have been hampered by scant information. With the new mortgage report we are combining information on the best mortgage offers, the best terms for buyers, and the equations in ensuring that buyers come out with good returns on their house buys, even after servicing their mortgage loans,” she said.

The Mortgage Company is now specializing in sourcing and arranging the best mortgages for home buyers across all possible lenders across East Africa.

“There are both funds and homes available to fuel a much greater uptake, when mortgage buying is based on solid information and decision-making,” she says.

In the inaugural mortgage report in Nairobi early this week, Kariuki said returns for mortgaged home buyers across the last decade was impressive saying mortgaged buyers have consistently made returns, even on mortgaged home purchases, until the interest rate rises of 2011.

“Even at 20 per cent interest rates, mortgage buyers end up ahead during periods of house price growth, achieving more through the appreciation of their homes - in a market consistently suffering from short supply - than they pay in loan interest,” says Ms Kariuki.

“Interest rates are the single most critical factor in driving the mortgage market and access to more middle-income housing.”

She however says returns are far better and more sustained - even during periods of lower house price inflation – when interest rates are lower.

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