Relationship Between Cost Of Finance And Demand For Housing Units In Nairobi County
Ngochoch Vincent Barchok.
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Majority of people cannot afford to purchase houses outright and have to rely on a mortgage financing to buy them. However there are several issues to consider and among them is the cost of financing. These costs include requirements for deposits, other charges such as appraisal fees, legal fees, stamp duty, ledger fees and interest rates: once the mortgage is taken out, interest has to be paid. The main purpose of the study was to examine the relationship between access to housing finance and demand for purchase of housing units in Nairobi County. The study sought to answer the following research question: how does, Interest rates, and collateral influence demand for purchase of housing units in Nairobi County? The study used a descriptive design in collecting data from the respondents because it ensures complete description of the situation, making sure that there is minimum bias in the collection and interpretation of data.The target population is drawn from twenty three commercial banks and Housing Corporation of Kenya.The primary data for the study was collected using the questionnaires and complemented by desk research. Quantitative data was analyzed using descriptive and regression statistics with the aid of Statistical Package for Social Sciences (SPSS 21.0), while qualitative data was analyzed through content analysis. The study established that demand for purchase of housing units is negatively affected by cost of finance arising from high interest rates; legal, appraisal and ledger fees on stamp duty, title search, notary, insurance policy, credit check fees loans making it expensive; besides banks load closing cost on loan products making their financial products unaffordable to most customers. Interest rate, legal, appraisal and ledger fees and closing cost on loan influence demand for purchase of housing units. Most prospective house owners are negatively affected by the requirement for deposit or collateral as some banks offering mortgages require high threshold of deposit or collateral which some potential owners do not have. There is need for banks to develop financial products that are appropriate and relevant to customers of all economic stratas on the basis of service and structure costs that do not lead the customer to encounter access and/or use difficulties. They also need to continuously review the cost structure on their products so as to enhance the uptake of finance for purchasing housing units. There is need for banks to regularly review the cost of their financial services such as interest rates; legal, appraisal and ledger fees on stamp duty, title search, notary, insurance policy, credit check fees loans so that they can unlock the bottlenecks that negatively influence demand for their products and the subsequent relation with the purchase of housing units making them accessible to relatively most of the clients