State input needed in financing mortgages


Home prices see biggest fall in 4 years as mortgage rates rise. FILE PHOTO | SHUTTERSTOCK

That the cost of servicing mortgages in Kenya has risen on higher interest rates and charges in an economy where inflation is eating deeply into earnings is worrying.

Data shows interest rates banks charge for a Sh9.2 million mortgage maturing in 12 years is now priced at between 11.5 percent and 18.18 percent, with customers expected to pay as much as nearly three times the borrowed amount.

The latest spread of interest rates is higher compared with 2021 when mortgages were priced from 7.1 percent to 15 percent, meaning more Kenyans are being locked out from the dream of owning a house.

The proportion of citizens owning homes is usually cited as one of the indicators of a country’s economic health.

But the number of mortgage accounts has been falling, remaining below 27,000 in a market with an estimated annual demand of between 200,000 and 250,000 housing units.

Low levels of income and the high cost of property are the top stumbling blocks.

The generally low-income levels cannot service the minimum monthly repayment of Sh118,065 on the average mortgage of Sh9.2 million.

The government must work closely with banks to attract long-term financing through channels such as the Kenya Mortgage Refinance Corporation and lower interest rates and other charges.

State subsidies on construction inputs and tax breaks for developers supplying affordable houses at large scale can also help in lowering the cost of mortgages.

The government should go big on affordable housing and ensure first-time buyers take up houses and homes.

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Note: The results are not exact but very close to the actual.