Banks may shift to mortgage over high lending risks
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.