Determinants Of Demand For Mortgage Finance In Kenya: A Case Of Nairobi County

Abstract

There is a low demand for mortgage finance in Kenya this was demonstrated by the few number of mortgage accounts in Kenya. The Central Bank of Kenya report shows that there were only 22,013 mortgage accounts in Kenya in 2014. This number is very low when compared to the demand for housing and population in the country. Based on these statistics, this study aimed to determine the determinants for the demand of mortgage finance in Kenya. The study was focused on the effect of, price of mortgage substitutes, cost of mortgage, income levels and promotion on the demand for mortgage in Kenya. The target population of this study was applicants for mortgage finance both successful applicants and those who were not successful. Random sampling technique was used to obtain a sample size of 384 respondents. Data was collected using structured questionnaires. The collected primary data was analyzed using Statistical Package for Social Science (SPSS) version 20. A binary logistic regression analysis was conducted on the data set to ascertain the effects of independent variables on dependent variable. The Pearson Product was used to analyze the data in which correlation coefficient (R) and the coefficient of determination (R2 ) of the variables was established. The findings from the analysis were organized and summarized in form of percentages, means ratios and frequencies and presented using tables and pie charts. The results in the multivariate logistic regression indicated that the likelihood of cheap mortgage substitutes resulting to low demand for mortgage finance in Kenya was 4.911 times higher than more costly mortgage substitutes. The findings further indicated that the likelihood of high legal cost and high stamp duty cost causing low mortgage demand are 2.550 and 2.274 times higher than when the costs are low. The findings also indicate that the likelihood of low-income levels causing low demand for mortgage substitutes was 6.369 high than high income levels. Finally, the findings indicate that the likelihood of lack of promotion causing low mortgage demand was 5.808 higher than having promotion. The study recommended that mortgage financing institutions should consider the cost of mortgage substitutes, cost of mortgage, income level and promotion in order to increase the demand for mortgage finance in Kenya.