Kenya’s mortgage market expanded modestly in 2024, with the total value of outstanding mortgage loans increasing to KSh279.3 billion, up from KSh270.4 billion the previous year, according to the Central Bank of Kenya’s (CBK) latest Residential Market Survey.
The annual survey, which monitors developments in the housing finance sector, highlights both growth and challenges in the mortgage market. Despite a rise in the overall loan book, the report reveals a troubling increase in non-performing mortgages, signalling growing financial stress among borrowers.
The CBK report shows that outstanding mortgage loans rose by KSh8.9 billion, representing a 3.3% growth year-on-year. This increase was primarily attributed to the issuance of new mortgages in 2024.
A total of 30,016 mortgage accounts were recorded in December 2024, compared with 29,260 in 2023. This marks an increase of 756 new mortgages, or 2.6%, mainly driven by new loans advanced during the year.
Despite the expansion, the average loan size fell from KSh9.4 million in 2023 to KSh9.0 million in 2024. Analysts suggest this decline reflects a shift towards smaller loan amounts, as households adjust to rising interest rates and tighter credit conditions.
The report paints a concerning picture of mortgage risk in Kenya. The value of non-performing mortgage loans surged from KSh39.9 billion in 2023 to KSh46.0 billion in 2024.
This pushed the non-performing loans (NPL) ratio to 16.5% of gross mortgage loans, compared with 14.4% a year earlier. Although slightly lower than the overall banking sector’s NPL ratio of 17.1%, the increase suggests that more Kenyan households are struggling to keep up with mortgage repayments amid a challenging economic environment.
Mortgage lending remains highly concentrated within a small number of banks. According to CBK, 89.9% of all mortgage lending was handled by just nine institutions in 2024.
The bulk of this lending came from large commercial banks, which accounted for 76.4% of the total mortgage portfolio. Medium-sized banks contributed 13.1%, while small banks played only a minor role in the sector.
Interest rates on mortgages in Kenya remained high throughout 2024. The survey found that the average mortgage rate was 14.9%, with banks charging between 12.0% and 18.6%.
Such high borrowing costs continue to be a major barrier to home ownership in the country, with many potential borrowers locked out of the mortgage market.
The report further shows that 85.9% of mortgage loans were on variable interest rates, exposing borrowers to fluctuations in the cost of credit. The loan tenure ranged from 5 years to 18 years, with the average term standing at 11 years.
The CBK notes that while the mortgage market is gradually expanding, affordability remains the single biggest constraint. High interest rates, strict lending requirements, and rising default rates continue to weigh on the sector’s growth.
Kenya’s mortgage market has significant untapped potential, given the country’s growing middle class and increasing demand for urban housing. However, reforms are needed to make housing finance more accessible and affordable.
Efforts by the government to expand access to affordable housing under the Affordable Housing Programme (AHP) could provide a much-needed boost, though success will depend on collaboration between banks, developers, and policymakers.
The CBK 2024 Residential Market Survey underscores both progress and vulnerability in Kenya’s housing finance sector. While the mortgage loan book crossed the KSh279 billion mark, rising defaults and prohibitively high interest rates signal that many Kenyans remain priced out of the housing market.
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