This archive report was first published on 20 November 2019.
Kenya's mortgage market faced significant challenges in 2018, with defaults rising to Ksh38.1 billion in December, up from Ksh27.3 billion in the same period the previous year.
According to the Central Bank of Kenya's Banking Supervision Report for the year ended 31 December 2018, the average mortgage loan size decreased from Ksh8.52 million in 2017 to Ksh8.48 million in 2018, as banks tightened their credit standards.
The report also noted that the number of mortgage loans in the market increased by 317, or 1.2 percent, to 26,504 in December 2018, compared to 26,187 in December 2017.
Despite this, the value of mortgage loan assets outstanding grew by only Ksh1.7 billion, or 0.76 percent, to Ksh224.9 billion in December 2018, from Ksh223.2 billion in December 2017.
The default ratio for mortgage loans stood at 16.9 percent in December 2018, compared to 12.2 percent in December 2017, exceeding the industry average of 12.3 percent in 2017 and 12.7 percent in 2018.
Market Concentration and Interest Rates ¶
Notably, six banks accounted for 76.1 percent of lending to the mortgage market in 2018, with the average interest rate charged on mortgages standing at 12.4 percent, ranging from 10.0 percent to 13.2 percent.
The average loan maturity period was 10.6 years in 2018, with a minimum of 4 years and a maximum of 22 years, compared to 11.9 years in 2017, with a minimum of 5 years and a maximum of 25 years.
As the report notes, this shift could be attributed to banks reviewing their mortgage terms to offer loans in shorter periods and mitigate increasing credit risk in the real estate sector.
