Why Kenyans can only afford 26,000 mortgages annually

Real estate or property investment concept. Home mortgage loan rate. [Getty Images]

It would be easier for more Kenyans to afford homes if the mortgage regime in the country would allow long-term borrowing above the standard 25 years, a real estate consulting firm has said.

This is one of the challenges the sector faces, with former Knight Frank Kenya Managing Director Ben Woodhams, who is now the firm’s Africa representative in London (partner, Africa desk), saying it could be due to the country’s nascent real estate market.

Countries such as the United Kingdom (UK) have a mature real estate sector. It is also one of the main challenges cited by the Central Bank Kenya (CBK) for hindering the uptake of mortgage loans.

Mr Woodhams, while addressing the challenge of few mortgages in the country, said it is difficult for an ordinary employee to service a mortgage provided at the current rates.

These rates currently average 13 per cent. “People are just not going to do it. And I think it is a great shame. I have always felt there should be more mortgages in this country,” he said. Mr Woodhams noted that if the repayment periods can be extended - from the average 25 years – then monthly payments would reduce. “I am not an economist – I am an estate agent, and I am looking at it from my perspective – but if we could, and get the interest rates down, then get more people to participate in that growth, then we will see that wealth distribution go out there instead of remaining in the hands of a few,” he said.

He noted that in his early 20s, he was able to purchase a flat In London by paying a 10 per cent deposit for a 99-year mortgage.

“That is the other thing. The interest rate might be high, but it also depends on how long the mortgage is because that is how much you have to repay every month,” he said.

“The longer the mortgage, the smaller the amount. Here we are talking about a high-interest rate for a very short term – 20 years – so your loan repayments are very high.”

According to the CBK Bank Supervision Annual Report 2021, there were 26,723 mortgage loans in the market by the end of last year, down from 26,971 in 2020.

“This was a decrease of 248 mortgages or 0.9 per cent. This 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,” reads the report.

During the period, the average mortgage loan size increased from Sh8.6 million in 2020, to Sh9.2 million in 2021. This was mainly due to higher values of mortgage loans advanced in the year.

“The outstanding value of non-performing mortgage loans increased from Sh27.8 billion in December 2020, to Sh28.3 billion in December 2021,” the report notes.

“The non-performing mortgage loans to gross mortgage loans ratio was 11.6 per cent in December 2021, as compared to 12.0 per cent in December 2020.”

In mature democracies such as the UK, individuals have options for interest-only mortgages. This allows one to pay only the interest accrued during the period of the mortgage, say 25 years.

While at the end of the tenure one is still indebted for the principal amount, they have an option of paying it in full, remortgaging the property or opting for a repayment plan rather than interest only.

Mr Woodhams says not having such an arrangement in Kenya is also possible, though it could take time. Compared to Kenya whose mortgage market is controlled 84 per cent by eight institutions (seven large banks and one small-sized), the UK has about 100 mortgage lenders, according to, a mortgage broker.

The CBK report cites “limited access to affordable long-term finance” as one of the mortgage market obstacles. Others are high cost of land, low income and credit risk.

The report, as part of the solution, suggests the introduction of a securitisation law that will create a secondary market for mortgages and allow primary issuers to underwrite more mortgages.

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