Mortgage market records robust growth despite affordability hurdles

The Central Bank says about 75.6 per cent of mortgage loans were on variable interest rates in 2025, compared to 85.9 per cent in 2024. [File, Standard]

More Kenyans accessed single-digit mortgage loans in 2025 as Kenya Mortgage Refinance Company (KMRC) increased the amount of financing extended to lenders by Sh7.7 billion during the year that ended in December.

According to the Central Bank of Kenya (CBK) Banking Supervision Report 2025, the increased funding contributed to a decline in the number of mortgage loans priced on variable interest rates during the period.

The report published on Tuesday states that about 75.6 per cent of mortgage loans were on variable interest rates in 2025. This is compared to 85.9 per cent in 2024.

“This was due to an increase in mortgage loans under fixed interest rates from 14.1 per cent in December 2024 to 24.3 per cent in December 2025,” the report says.

KMRC, through partnerships with financial institutions - banks and Saccos - extends mortgage loans to end customers at single-digit fixed rates to ease the high interest burden associated with home ownership.

This is particularly critical for first-time homeowners.

This increase in the size of home loans on fixed rates also resulted in reduced average interest that financial institutions charged borrowers in the period.

The report shows that the interest rates for mortgage loans in 2025 ranged from 7.5 per cent to 19.6 per cent compared to 8.2 per cent to 20.4 per cent in 2024.

“The average interest rate on mortgages was 13.5 per cent in 2025, as compared to 15.2 per cent in 2024,” the report says.

Consequently, the average loan maturity also improved.

In the period highlighted, the average loan maturity was 11.5 years with a minimum of 5.7 years and a maximum of 18 years. This is compared to an average loan maturity of 11.1 years with a minimum of 5.3 years and a maximum of 18 years in 2024.

“This is an indication that banks increased the maturity period of mortgage facilities in 2025,” says CBK in the report.

Overall, there were 30,762 mortgage loans in the market in December 2025, up from 30,016 in December 2024. This was an increase of 746 mortgages or 2.5 per cent.

“This was mainly due to new mortgage loans granted in the year,” the report adds.

The number of mortgage loans surpassed the 30,000 mark for the first time in 2024.

KMRC was given a target of facilitating this figure to hit 60,000 by 2022 when the institution was unveiled back in 2019 by Retired President Uhuru Kenyatta.

A survey that contributed to the report indicated that 10 institutions had received mortgage refinancing from the KMRC in 2025, compared to seven institutions in 2024.

“The 10 institutions had outstanding facilities amounting to Sh19.6 billion in December 2025 as compared to seven institutions with outstanding facilities amounting to Sh11.9 billion in December 2024,” the report says.

Data from the regulator shows that the value of mortgage loans outstanding was Sh307.2 billion in December 2025 compared to Sh279.3 billion in December 2024. This is a growth of Sh27.9 billion.

Of the total lending, 90.6 per cent was by nine institutions. These are seven banks from the tier one group (77.4 per cent) and two from the medium-sized category (13.2 per cent).

This is compared to 89.9 per cent of lending by nine institutions in 2024, eight banks from the large peer group (81.6 per cent) and one from the medium-sized banks (8.3 per cent).

It adds that the outstanding value of non-performing mortgage loans increased from Sh46 billion in December 2024 to Sh50.2 billion in December 2025.

The non-performing mortgage loans to gross mortgage loans ratio was 16.3 per cent in December 2025 compared to 16.5 per cent in December 2024.

“The ratio was above the industry gross NPLs to gross loans ratio of 16.0 per cent in December 2025, and below the industry gross NPLs to gross loans ratio of 17.1 per cent in December 2024,” the report says.

While KMRC has to some extent eased access to mortgage facilities, CBK in the report singled out low level of income, high cost of property purchase and high cost of land for construction as the top three issues bedevilling potential home buyers.

These are the same issues highlighted as well in 2024.

“Based on the above ranking of mortgage market constraints, banks identified low level of income, high cost of property purchase and limited access to affordable long-term finance as the major impediments to the growth of their mortgage portfolios,” the report says.