Macroeconomic Indicators and Mortgage Uptake in Housing Finance Group Public Limited Company, Kenya
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Date
2024-05
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Kenyatta University
Abstract
Kenya has a significant housing demand that is fueled by urbanization trends and a growing
population. As a result, the existence of an effective housing financing system is crucial for
meeting both individual housing demands as well as the growth of the construction, financial, and
related industries. However, Kenya has faced challenges in providing accessible and affordable
home finance options, with fewer than 27,000 mortgage accounts reported as of December 2021.
Additionally, financial institutions have often offered limited long-term financing solutions, with
only a few utilizing capital markets for mortgage loan financing. The primary objective of this
research project was to establish a relationship between macroeconomic indicators and mortgage
uptake within HF Group Plc. Specifically, the study aimed to investigate the impact of inflation
rates, mortgage interest rates, exchange rates, and GDP growth rates on mortgage uptake within
Housing Finance Group Plc. A number of economic theories, including the Purchasing Power
Parity Theory, Fisher’s theory, the Title theory, the Lien theory of mortgages, and the Classical
Theory of Interest Rates, informed the study. A descriptive research design was used to carry out
this study. The HF Group Plc made up the study's target population. The study used both secondary
and primary data sources. Books, academic publications, online databases, and financial records
from HF Group Plc were used to collect secondary data. Primary data was collected through
questionnaires administered to 180 employees and 120 customers of HF Group Plc. Data was
collected over a five-year period, spanning from 2018 to 2022. Data collected from various sources
was meticulously organized and checked for outliers and errors using Microsoft Excel
spreadsheets. Afterward, the data was transformed into panel format and imported into SPSS
version 26 for analysis. Panel regression analysis was conducted to draw meaningful conclusions
regarding the research variables, which include the dependent variable and independent variables.
The study further subjected to statistical analysis that entailed Multicollinearity, Heteroscedasticity
and normality. The researcher was committed to obtaining valid consent from every individual
from whom data was collected. Furthermore, the researcher diligently upheld the confidentiality
of the gathered information. The study findings led to conclusion that a statistically significant
relationship exists between inflation (CPI) and mortgage loan uptake in Housing Finance Group
mortgage interest rates significantly affected mortgage loan uptake in Housing Finance Group,
exchange rates insignificantly affected the mortgage loan uptake in Housing Finance Group (HF),
and finally was that a significant relationship exists between GDP and mortgage loan uptake in
Housing Finance Group (HF). The research findings can assist financial institutions in shaping
their marketing strategies and exploring diversification opportunities to enhance profitability and
foster growth. This research findings can also aid potential homeowners in making informed
decisions about real estate derivatives, potentially leading to significant cost savings The study
recommends that the government, through its line ministries and policy institutions, should
implement effective inflation control measures to mitigate the effects of inflation on mortgage loan
uptake. The study also suggests that the management of Housing Finance (HF) in Kenya should
consistently review and evaluate the prevailing economic conditions before extending mortgage
loans. The study recommends that individuals considering mortgage loan uptake should regularly
review and monitor any increases in lending interest rates
Description
A Research Project Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Business Administration (Finance) Kenyatta University
May 2024