Banks may shift to mort­gage over high lend­ing risks

The Star (Kenya) - - News -

CYN­THIA ILAKO/ Bankers ex­pect the rate cap law en­forced in mid Septem­ber to boost up­take of mort­gages fol­low­ing a 2.2 per cent rise in house prices in the July-Septem­ber pe­riod com­pared to 1.25 per cent a year ear­lier.

Kenya Bankers As­so­ci­a­tion chief ex­ec­u­tive Ha­bil Olaka said with the in­ter­est cap at 14 per cent, some lenders are ex­pected to move away from high­risk prod­ucts.

“The num­ber of out­stand­ing mort­gages has been on the lower side. With the in­ter­est rate cap­ping we hope to see an in­crease,” Olaka said. The rise in house trans­ac­tion coun­try­wide in the third quar­ter was at­trib­uted to in­creased labour and in­fras­truc­tural costs.

“Whereas we have seen a con­sis­tent rise in hous­ing prices, the rise is not dras­tic and there­fore does not re­flect vo­latil­ity in hous­ing prices,” KBA’s di­rec­tor for re­search Jared Osoro said. “Over the last four years that we have been track­ing the prices we have seen a rise of about 13.02 per cent.”

Apart­ments made up about 58.56 per cent of sale trans­ac­tions, KBA said, cit­ing ris­ing mid­dle class. Maisonette and bun­ga­low units ac­counted for 24.31 per cent and 17.13 per cent of the share.

“The new units be­ing put up in the mar­ket are mainly tar­get­ing the mid­dle end of the mar­ket, with the lower end ex­pe­ri­enc­ing sup­ply con­straints aris­ing mainly from the ten­dency of de­vel­op­ers in­clin­ing more to­wards rent­ing than sell­ing,” Osoro said.

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