| dc.description.abstract | Mortgage finance is the provision of finance or capital for housing. In Kenya the institutions
that lend money for real estate projects include: banks, mortgage firms, saving and loans
firms, insurance companies, government parastatals, pension funds, trusts and other real
investment institutions. Unlike unsecured loan, mortgage finance is a secured loan whereby
the mortgaged property acts as collateral by the customer as a pledge for security of the
extended credit. This study sought to evaluate the effect of inflation and interest rates on
mortgage financing by Kenyan commercial banks. To achieve this objective, the study
employed a descriptive-correlation research design. Ten commercial banks offering mortgage
finance in Kenya were considered. This research relied on secondary which was obtained
from banks‟ annual reports and financial statements and the Kenyan Economic Surveys over
a period of fives between the years 2008-2012.
The collected data was edited, coded and entered for analysis using the Statistical Package for
Social Sciences (Version 17.0) computer package. Both descriptive and inferential statistics
were used. The research findings revealed that there was a strong positive relationship (R=
0.717) between the variables. The study also revealed that 51.4% of mortgage financing in
Kenya could be explained by inflation and interest rates. From this study it was evident that
at 95% confidence level, the variables produced statistically significant values and can be
relied on to explain mortgage financing by Kenyan commercial banks. However, interest
rates explain mortgage uptake in Kenya than inflation rates. The research findings were
presented in pie charts, bar graphs, and tables for clarity. The findings of this study will be of
great use to the government, lending institutions in formulating mortgage financing policies
so as to promote the uptake of mortgage facilities in Kenya.
Based on the research findings the following policy recommendations were proposed: The
management of commercial banks should ensure that interests charged on mortgage facilities
are competitive in the market so as to attract consumers of this product. The government
should enact legislation which regulates the inflation and interest rates in the banking
industry so as to protect the interests of both consumers and lenders in the market. The
government should also enforce monetary and fiscal policies through the Central Bank of
Kenya (CBK) so as to regulate money supply in the market. | en |
