More Kenyans Defaulting on Mortgage As Economy Shatters Home Ownership Prospects

The number of Kenyans defaulting on their mortgage continues to grow as the defaults increase by 10.8 billion shillings.

Mortgage defaults in December 2018 stood at 38.1 billion shillings from a previous 27.3 billion shillings in December 2017.

It is evident that general economic struggles witnessed in the country are seriously hurting the real estate industry according to the Central Bank of Kenya (CBK) Banking Supervision Report for the year ended 31 December 2018.

The average mortgage loan size reduced from 8.52 million shillings in 2017 to 8.48 million shillings in 2018 since banks stiffened credit standards to a mortgage.

In December 2018, there were 26,504 mortgage loans in the market up from 26,187 in December 2017 which was an increase of 317 loan accounts.

Mortgage defaults to gross mortgage loans have continued to increase from 12.2 percent in December 2017 to 16.9 percent in December 2018 according to the CBK report.

An estimated 76.1 percent of lending to the mortgage market was by 6 lenders which is, one medium-sized bank at 15.0 percent and five large-sized banks at 61.1 percent compared to 75.5 percent lending by one medium-sized bank at 20.9 percent while five banks from the large peer group at 55.6 percent in the year 2017.

The number of banks offering mortgages has increased from 31 institutions in 2017 to 33 in 2018 with an average interest cap of 12.4 percent ranging between 10.0 percent and 13.2 percent.

The average loan maturity is also known as the due date was 10.6 years with a minimum of 4 years and a maximum of 22 years in 2018 compared to average loan maturity of 11.9 years where the minimum was 5 years and the maximum was 25 years in 2017.

The report noted that this could be attributed to banks’ review of mortgage terms to offer mortgage loans in shorter periods to alleviate increasing credit risk in the real estate sector.