Mortgages drop by 1,270 as the cost of owning homes soars

Seven big banks controlled close to three-quarters of the market by December 2021. [iStockphoto]

Kenyans have continued to shun mortgages, with the number of home loans dropping to 26,723 last year.

A report by the Central Bank of Kenya (CBK) said this was a drop of 248 mortgage loans compared to 26,971 in 2020.

“This (decline) was mainly due to a higher number of mortgage loans that were repaid as compared to the number of new mortgage loans granted in the year,” said the 2021 Residential Mortgages Market Survey.

This means that in three years from 2019, the number of mortgages has cumulatively dropped by 1,270, despite the government implementing the affordable housing programme that was supposed to help build over 500,000 low-priced houses by end of June this year.

The effects of Covid-19, high cost of property purchase, limited access to affordable long-term financing and low levels of income are some of the factors that have discouraged the growth of mortgages according to the survey.

Others are high incidental costs such as legal and valuation fees and stamp duty.

While the number of mortgages declined, the value of mortgage loans outstanding rose to Sh245.1 billion in December 2021 compared to Sh232.7 billion in December 2020.

This was an increase of Sh12.4 billion, or 5.3 per cent - a reflection that an increasing number of middle-class families are shunning mortgages, while the rich are taking them up more. “The increase was due to higher values of mortgages granted in 2021,” said CBK.

Eight financial institutions control 84 per cent of the mortgage market, most of them banks. Seven large banks, led by KCB controlled close to three-quarters of the mortgage market while one small-sized bank controlled a tenth by end of December 2021.

There will be no respite for the real estate market as the sector comes to terms with the after-shocks of the pandemic, and investors take a wait-and-see approach due to the upcoming polls.

However, CBK noted that investors are banking on mass vaccinations against Covid-19 and the implementation of the affordable housing programme under the Big Four agenda.

Infrastructural developments being undertaken are also expected to encourage people to move to locations with affordable houses, thus giving the sector a big boost this year.

Additionally, funding from Kenya Mortgage Refinance Company (KMRC) is expected to increase mortgage uptake.

KMRC is supposed to refinance, and de-risk primary mortgage lenders including commercial banks, Saccos and microfinance banks so that they can lend to homeowners at a low rate.

Lenders have argued that there are no developers interested in building low-cost housing.

“On low-cost housing, let me be very emphatic that the challenge we face on our side is a supply shock,” said outgoing KCB Group Chief Executive Joshua Oigara in an earlier interview with The Standard.

With a mortgage portfolio of around Sh76.3 billion, KCB is one of the main players in the affordable housing market. “What I must say is a lot of low-cost housing projects are not coming up as fast as we wanted,” said Mr Oigara.

The Kenya National Bureau of Statistics data shows that many Kenyans in urban areas live in rented houses, while those in rural areas have homes of their own.

Very few Kenyans live in homes they bought, reflecting the high cost of buying a home.

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