EFFECT OF MORTGAGE FINANCING ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

Mortgage financing plays a significant role in poverty reduction in the economy and also provides an opportunity for financial institutions offering it to generate more revenue and grow. However, the adoption of mortgage financing has not been fully adopted by financial institutions leading to the institutions recording far from impressive financial performance levels. The study main objective was to determine the effect of mortgage financing on financial performance of commercial banks in Kenya. All commercial banks in Kenya were used as used as target population. Secondary data collected using a data collection sheet from the financial reports of the commercial banks as well as CBK annual reports was used in the study. Both correlation and regression analysis were conducted.  The findings revealed a positive significant effect of Amount of Mortgage Offered on financial performance. The study findings also indicated that Interest Charged on Mortgage has a positive and significant effect on financial performance of commercial banks. The study recommended a need for commercial banks to increase the Amount of Mortgage Offered as well as other activities that augment the total value of mortgage loans extended in order to improve their financial performance. The commercial banks should also improve on the quality of mortgage products offered to enhance higher Mortgage loans uptake thereby improving their financial performance. Commercial banks should adjust their mortgage lending rates positively whenever they increase the Amount of Mortgage Offered which will in turn enhance their profitability leading to an improvement in financial performance. Increases in Interest Charged on Mortgage leads to growth in long-term mortgage loans hence improving financial performance.

Key Words: Mortgage Financing, Commercial Banks in Kenya