Effect of Interest Rate Volatility on Mortgage Uptake Among Selected Commercial Banks in Kenya

Abstract

The purpose of this study was to examine the effects of interest rate volatility on mortgage uptake among the selected commercial banks in Kenya. The objectives of the study was to determine the effects of inflation ,credit risk, loan demand and gross domestic product on interest rate and relationship with mortgage uptake. The study found that GDP growth and mortgage uptake in Kenya had a positive and significant relationship. The study also found that inflation and mortgage uptake in commercial banks in Kenya had a negative and significant relationship. The study further found that credit risks had insignificant influence on the mortgage uptake in commercial banks in Kenya. Also the study revealed that loan demand had positive and significant influence on the mortgage uptake in commercial banks in Kenya. The study concluded that inflation rate has a substantial influence on the mortgage uptake of commercial banks in Kenya. Inflation reduces the value of money and hence does not favour the mortgage uptake. Concisely, the findings showed that 68.8 % of the mortgage uptake is explained by the four variables and the remaining 31.2% can be accounted by the standard error and other factors.