Effects Of Central Bank Base Rate On Mortgage Rates Of Commercial Banks In Kenya
The factors that determine the mortgage rates of commercial banks are of important concern to the general public, the banking industry and the policy makers at large. The market for mortgage loans is competitive and rates on these loans have tended to respond to changes in Central Bank of Kenya Base Rate. This study was conducted with an aim to determine the effects of Central bank Base Rate on Mortgage Rates of commercial banks in Kenya. The population of this study consisted of all the commercial banks offering mortgage loans to their clients. The study used secondary data in its analysis. T his was done by collecting data of various mortgage rates for the period under study and various Central Base Rates for the same period. The data was analyzed by SPSS and regression results interpreted. This represented in tables and line graphs for analysis. The results revealed a there is a positive correlation between Central Bank Base Rate and the average Mortgage Rate in the market and only 7% of the total variations of the data used remained unexplained. The research was a success as we managed to meet the objectives. The results of the regression show that even if the CBK Base Rate was zero, the banks would still charge a 10.802% on the mortgage rates. The slope of the gradient is 0.654 showing the sensitivity a unit change in CBK Base Rat e has on average mortgage rate.