Mortgage Financing And Financial Performance Of Commercial Banks In Kenya

There is a high demand for housing in Kenya. This is due to continuous growth in population. Mortgages from banks are crucial in fulfilling this demand. The main objective of this study was to investigate how mortgage financing influences the financial performance of commercial banks in Kenya. It specifically aimed to understand the impact of interest rates, borrower income levels, and repayment periods on the financial performance of Kenyan banks. The paper was underpinned by Keynes’s liquidity preference, absolute income, and title and lien theories. Causal research design was used. Thirty-one mortgage offering commercial banks were the data sources. Secondary data was used. The target commercial banks yearly financial data, Central Bank of Kenya, and Kenya Banker’s Association provided the secondary data. The analysis involved using descriptive statistics to summarize the data and panel regression to explore relationships between variables. The findings revealed a coefficient of determination of 0.4369. They further showed a negative relationship between mortgage lending banks performance and interest rate, natural logarithm of income level of borrowers positively and significantly affected the financial performance of mortgage issuing Kenyan banks and mortgage loan repayment period had a positive impact on mortgage offering Kenyan banks. The study comes to the conclusion that mortgage lending significantly improves Kenyan mortgage selling banks' financial performance. The ever-increasing demand for houses encourages individuals to take mortgages and improves the financial efficiency of Kenyan banks when default rate is low. This study thus recommends that Kenyan banks offering mortgages should encourage the culture of saving among their customers as this will increase their liquidity to offer mortgage loans which will in turn positively influence their financial performance