COVID-19 freezes new mortgages


COVID-19 freezes new mortgages

In Summary

  • The new survey contained in the 2021 Banking Sector Annual report published this week attributes the dip in mortgages to repayments and decreased mortgage facilities advanced by banks due to effects of COVID-19.
  • The number of mortgage loan accounts now stand 26,971, 3.7 percentage points down from a previous 27,993.
  • The survey predicts the mortgages sub-sector to remain subdued by the pandemic even as it expects reforms such as the digitization of the land registry and the operation of the Kenya Mortgage Refinancing Company (KMRC) to anchor a potential rebound.

The value of outstanding mortgages fell to Ksh.232.7 billion in 2020 from Ksh.237.7 billion a year earlier according to a new survey by the Central Bank of Kenya (CBK).

The new survey contained in the 2021 Banking Sector Annual report published this week attributes the dip in mortgages to repayments and decreased mortgage facilities advanced by banks due to effects of COVID-19.

The number of mortgage loan accounts was similarly down 3.7 per cent at 26,971 from a previous 27,993.

“The decrease was mainly due to repayments and fewer mortgage loans advanced due to the effects of the pandemic,” noted the survey.

Nevertheless, the outstanding value of non-performing mortgage loans decreased to Ksh.27.8 billion from Ksh.32 billion in December 2019 from repayments made during the year.

This trimmed the ratio of non-performing mortgage loans to gross mortgage loans to 12 per cent from a higher 13 per cent, half a percentage point below the industry gross NPLs to gross loans ratio.

At the same time, the average mortgage loan size grew slightly to Ksh.8.6 million from Ksh.8.5 million in 2019.

The fall in new mortgages was despite an ease to the cost of credit in the sub-sector with the interest charged on the loans falling to a mean 10.9 per cent from 11.3 per cent previously.

However, banks trimmed the period of mortgage facilities irrespective of shocks brought by the pandemic with the average loan maturity period falling to a flat 11 years from 11.2 years.

The COVID-19 pandemic tops concerns on the mortgages market obstacles with a score of 39 per cent beating both the cost of units and land for construction.

The survey predicts the mortgages sub-sector to remain subdued by the pandemic even as it expects reforms such as the digitization of the land registry and the operation of the Kenya Mortgage Refinancing Company (KMRC) to anchor a potential rebound.

KMRC disbursed an initial Ksh.2.7 billion to back the funding of 1400 new mortgages by banks in December as the entity begun operations.

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Story By Kepha Muiruri
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