How age blocks Kenyans from accessing mortgages

Low-income levels and advanced age are some of the key factors that block many Kenyans in need of mortgages.

A new report shows how the failure of income to increase with age for the majority of Kenyans affects their ability to borrow for home construction.

The result is that there are more individuals advanced in age at the lower income level category with also those who make it to the top being advanced in age as well.

Age, in addition to income, is a critical factor that financial institutions look at when one borrows. This is particularly when one has no collateral and is formally employed since the retirement age is 60.

The report was authored by the Terwilliger Centre for Innovation in Shelter, a unit of Habitat for Humanity.

Mortgages in Kenya are offered on a tenure of average 20 to 25 years.

The report on systemic barriers towards access and usage of housing finance in Kenya says the average age for those who are categorised within the mortgage gap is 40. The age for those categorised for low-cost housing is also 40.

Those in need of social housing had an average age of 42 while the individuals categorised as middle and high-income have an average age of 44. 

These income levels are borrowed from the Kenya Affordable Housing Programme delivery framework, a government initiative that seeks to have more Kenyans own houses through the Kenya Mortgage Refinance Company and the affordable housing programme.

The income breakdown in the framework is also borrowed from the World Bank.

The report released in August 2023 collected data from both the supply and demand side.

The supply side involved data collection from three banks, three microfinance banks, seven credit-only microfinance institutions, seven Saccos, and two wholesale financiers.

There was also a fintech company, 67 fundis (mason builders), and 26 participants from micro, small and medium enterprises(MSMEs) in the sector.

The demand side had 464 survey respondents comprising of rural, peri-urban and urban dwellers.

“According to the survey data, the average age for those in the lowest income category (less than 20,000) is 42. This suggests that many individuals in this income bracket may have been working for a significant period but have not been able to increase their income significantly over time,” the report says.

It says this may be due to a lack of access to better job opportunities, limited education or skills, or other factors. “As a result, they may face challenges in accessing housing finance due to a lower income level.”

Additionally, the results indicate that the proportion of respondents living in permanent houses increased with increasing income.

“People with permanent houses are considered to have satisfactory shelter, though quality and other specific factors may affect owner satisfaction,” the report says.

According to the report, those who make Sh19,999 and below per month are willing to borrow Sh1.05 million and can comfortably pay Sh10,147 while those earning between Sh20,000 and Sh49,999 want to access Sh1.5 million to pay sh16,730.

Those making Sh50,000 to Sh149,999 monthly are willing to borrow Sh2.6 million and repay Sh48,157 while those earning Sh150,000 and above want to access Sh2.3 million to repay at installments of Sh41,250.

“The higher willingness to borrow and pay among category three (Sh50,000 to sh149,999 monthly earners) respondents than those in category four (Sh150,000 and above) indicates higher aspirations in this segment driven by steady and predictable income sources and a decreasing need to borrow when incomes increase,” the report explains.

Unsurprisingly, the report notes, lower income categories (Sh19,999 and below and the Sh20,000 to Sh49,999 category) are willing to borrow significantly lower amounts of money.

“These results broadly indicate that income level affects the amount individuals are willing to borrow and pay. Higher-income individuals are generally more willing to take on larger amounts of debt."