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Costly mortgages deny many homes

Hopes of owning a house for an average Nairobian remain bleak, a new survey has revealed.

In its third quarter 2013 report, The Mortgage Company (TMC) and HassConsult say that between July and September, the average home loan was 16.96 per cent.

The high returns needed by banks have punished those already servicing mortgages while keeping financial services out of reach for majority of the middle-class.

“The best rate on offer from the mainstream mortgage market was 13.5 per cent from CfC Stanbic, unchanged from the previous quarter.

Notably, the most expensive mortgages continued to be offered by Equity Bank, Diamond Trust Bank, Consolidated Bank and Family Bank, all at eight per cent,” read part of the report released last week.

The cost of mortgage increased significantly in 2011 as the Central Bank of Kenya increased its benchmark rate occasioned by high inflation and a weak shilling.

Those in self-employment and small businesses has risen from 800,000 to 12 million, yet the banks  still make it difficult for them to access credit.

Currently, there is less than 20,000 mortgages in the market up against a  population of 40 million Kenyans.

“Even if you look at the approximately 3.9 million people who are deemed to be in the middle income bracket, that represents just 0.5 per cent of the potential market,” said TMC’s managing director, Caroline Kariuki.

City lawyer, Abdiwahid Biriq, believes the punitive mortgage rates, and high property prices may be the undoing of the market in future.

“Banks charge high interest rates, making borrowing very expensive. This has contributed to the housing shortage. Land is fast becoming unaffordable for most Kenyans who wish to own a home close to their workplace and public services,” he said in a write-up to Daily Nation last week.

Housing shortage and the desire to own a house has pushed developers to speculate on land and house prices to an extent that the middle-class have to overstretch themselves.

“Greedy developers are making a killing from Kenyans’ obsession with property. The pricing is simply irrational and goes against all conventional norms,” he added.