The effect of interest rates on the supply of real estate finance in Nairobi County
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Date
2013-11Author
Obondy, Stephen
Type
ThesisLanguage
enMetadata
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This study investigates the effect of interest rates on the supply of the real estate finance
in Nairobi County. It examines the theories for real estate finance.
The study adopts secondary data from the financial reports, mortgage market reports and
Management reports from HassConsult Ltd and the data readily available in the
companies’ websites.
The research adopted a descriptive method where the units of study sought to establish the
effect of interest rates on the supply of real estate finance in Nairobi County. This method
is preferred because it allows for the prudent comparison of the research findings. The
study concludes that the interest factor plays a major role in determining the supply of real
estate finance but with different weight and direction. This comes into play when the
research is done in the short term or the long term.
The study found that there was a strong positive relationship between the lending rate and
the total sales of real estate in the short term. The implication of the finding is that interest
rates have significant impact on the mortgage sales. The study determined the effect of the
interest rates on the supply of real estate finance and found out that more people are likely
to borrow money when the interest rate is lower as doing so will cost them less than at
another time. It was also evident that when the interest rate is higher, borrowing becomes
more expensive and slows. Hence there was significant increase in the sales index
matching with the drop in the mortgage interest rates. This principle applies to loans that
come in the form of mortgages. When interest rates are lower, people are generally more
willing to take out a mortgage than when rates are higher. Though higher interest rates
typically mean a cooling of demand for real estate, since a purchaser will have a higher
payment on the same property, the opposite is happening in the short term.
The study recommends that there is need for further research done on all the financial
institutions providing mortgage such as Credit unions because their determinants of
mortgage interest rates are not the same as those of commercial banks.
Citation
Master Of Business Administration (mba) School Of Business, University Of Nairobi,2013Publisher
School of business,