Effects of Macro-Economic Variables on Mortagage Loan Uptake in Selected Financial Institutions in Nairobi City County, Kenya
Owidi, Barrack Omondi
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The demand for housing in Kenya is immense and driven by a growing population and urbanization. Growing economic prosperity has also increased the demand for housing. This means that while there is an absolute shortage, and a growing one for housing in urban centers in Kenya, consumers do not have the means to satisfy the need for housing especially in town centers as financing is restricted by macroeconomic variables which converge to frustrate these unmet needs for housing. Vision 2030 cites housing and facilitation of the mortgage sector as one driver of the economic growth. This study therefore, sought to determine the effects of macro-economic variables on mortgage uptake. The specific objectives of the study were; To measure the effects of taxes incentive changes on mortgage uptake; to examine the effects of per capita income changes on mortgage loan uptake; To evaluate the effects of interest rate changes on mortgage loan uptake; To examine the effects of inflation rate changes and examine effect of exchange rate changes on mortgage loan uptake. The study adopted descriptive research design and descriptive statistics, correlation analysis and regression analysis as analytical tools with application of SPSS. The study was conducted in selected mortgage lender institutions of Housing Finance Corporation of Kenya and Kenya Commercial Bank in Nairobi City County. The target population was their employees in Credit department and the target area was all their branches in the four zones of Nairobi of Nairobi North, Nairobi East, Westland, and Nairobi West. 120 employees from Credit sections were selected using clustering and stratified sampling 72 from KCB and 48 from HFCK each from the two lenders. Both primary and secondary data were used in the study. Primary data was collected using open-ended questionnaires and closed ended questionnaires. The response rate was 82 of the 120 respondents sampled returned the questionnaire representing about 70 percent.The drop and pick method, posting of questionnaires was used to administer questionnaires. Secondary data included all the relevant literature from KNBS, World Bank reports, Central Bank of Kenya reports, financial and economic journals, seminar papers, books, Annual Economic Survey Reports and internet sources. The data was analyzed using descriptive statistics and inferential statistics. The research finding indicated that per capita income changes, inflation rate changes and mortgage interest rate changes have significant influence on mortgage loan uptake. While changes in tax incentives and foreign exchange rate changes has no significant influence on mortgage loan uptake. The study recommends as way of increasing mortgage loan uptake by the larger population of Kenya. That financial institution to be innovative by going for alternative financing options like covered bonds, credit swaps, REITS and securitization of mortgages to rope in more finances both locally and internationally to support the mortgage industry growth. The government agencies like Central Bank of Kenya,Kenya Revenue Authority and Nairobi Securities Exchange to facilitate through necessary legislation,incentives to encourage more players to join the industry both as suppliers and users in this industry. Further research should be carried on impact of urbanization on mortgage demand, government involvement on mortgage sector and effects of land reforms in encouraging growth in this sector.