INFLATION RATE, EXCHANGE RATE AND GROWTH OF MORTGAGE FINANCING AMONG COMMERCIAL BANKS IN KENYA

Chanzu Newton Luyali, Dr. Bichanga Julius M, Dr. Gekara M

Abstract


Housing is a basic human right as enshrined under the social pillar in the Kenyan constitution. It is a fundamental right though difficult to attain. It requires large capital amounts; which is out of reach to many ordinary people. To obtain this, loan financing has approaches within which savings are raised. Mortgage loans have become necessary to commercial banks in Kenya. The goal of the study was to investigate the effects of inflation and exchange rates on the growth of mortgage financing among Commercial banks in Kenya. The study adopted a descriptive research design, where a census of the 35 mortgage loan lending commercial banks over a period between 1985 and 2019. Secondary data was used from desired financial statements available to the public of the singular commercial banks and other posted reports of financial institutions and establishments in conformity with the study. Time-series data were analyzed using STATA software, regression analysis and model specification tests. The study found that inflation rate and exchange rate have significant effects on the growth of mortgage financing among commercial banks in Kenya. The study recommends that Kenya's central bank should put in place mechanisms to guarantee that inflation and exchange rates do not have an adverse impact on bank mortgage financing. As a result, the study advises that the government guarantees currency stability since currency fluctuations may have a negative impact on commercial bank mortgage borrowing.

Keywords: Inflation Rate, Exchange rate, Growth of Mortgage Financing


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References


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