Mortgage rise making it harder to own homes

By - Jun 8th 2023

It is increasingly becoming harder to own houses as banks continue to increase their interest rates locally. I have realised that even the push by the government on the three per cent housing contribution may not easily realise the dream to own homes following growing resistance from several quarters. The acres of space in mainstream newspapers that auctioneers publish houses to be auctioned weekly also tells a sorry story of battered dreams to own family houses.

Joseph, Nairobi


Prospective homeowners have suffered another setback as banks have cut mortgage terms by more than a year to 10.9 years increasing interest rates in the last year. The latest figures from the Banking Supervision Report from the Central Bank of Kenya (CBK) show that the majority of banks increased interest rates on mortgages from 11.3 percent in 2021 to 12.3 percent last year but slashed the loan maturity from 12 years to 10.9 years.

The report says that the average interest rate charged on mortgages in 2022 was 12.3 percent and it ranged from 8.2 percent to 17 percent compared to an average of 11.3 percent with a range of 7.1 percent to 15 percent in 2021. Experts concur that banks increased interest rates on home loans in line with a decision by the apex bank to raise basis points, piling pressure on potential homeowners.

The report says “The average loan maturity was 10.9 years with a minimum of five years and a maximum of 18 years in 2022, as compared to an average loan maturity of 12 years with a minimum of five years and a maximum of 20 years in 2021”

The local mortgage loan market has consistently performed below par - there are slightly over 25,000 mortgage accounts in a country of close to 50 million people. Home ownership through mortgage loans remains an insurmountable hurdle after financial institutions began announcing new risk-based interest rates pricing formulas, making the loans more expensive.

According to President William Ruto, affordable housing is part of his priority agendas with a plan to construct 250,000 units annually. Some experts say that mortgage remains among the best way to buy a house since you get 80 per cent of the value of the house paid for. However, many still shy away from it for varied reasons. The average new mortgage loan size has been about Sh8 million for the last one year.

According to the recently-launched Kenya Bureau of Statistics Economic Survey, most of the adult population, is now dreaming of home ownership. Our local middle-class income ranges from Sh23,670 to Sh199,999 per month and comprises about 45 per cent of the country’s population. The Real Estate sector in Kenya is characterised by a constantly growing demand for housing, but a low percentage of Kenyans are able to own homes due to the high costs.

- Harold Ayodo is an Advocate of the High Court of Kenya

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