- Mortgage lending expanded as borrowing costs eased
- Larger loans accounted for much of the growth in the market
- Banks continue to face rising pressure from mortgage defaults and housing costs
Kenya’s mortgage book grew 10 percent to Ksh307.2 billion in 2025 as rates eased, though bad loans rose, the Central Bank of Kenya reports.
Outstanding mortgages rose from Ksh279.3 billion in December 2024 to Ksh307.2 billion in December 2025. That is an increase of Ksh27.9 billion. Banks attributed the growth to new loans granted during the year.
However, the Central Bank of Kenya (CBK) also flagged growing stress in the market. Its Bank Supervision Annual Report 2025 shows non-performing mortgage loans climbed from Ksh46.0 billion to about Ksh50 billion over the same period.
Borrowers enjoyed lower costs. The average mortgage interest rate fell to 13.5 percent in 2025, down from 15.2 percent in 2024. Rates ranged from 7.5 percent to 19.6 percent, compared with 8.2 percent to 20.4 percent a year earlier.
Fixed rate loans also gained ground. They made up 24.3 percent of mortgages in December 2025, up from 14.1 percent in December 2024. Variable rate loans fell to 75.6 percent from 85.9 percent.
Repayment periods stretched too. The average loan maturity rose to 11.5 years from 11.1 years, with a range of 5.7 to 18 years. CBK read this as a sign that banks lengthened mortgage terms in 2025.
Meanwhile, loans got bigger. The average mortgage rose to Ksh10 million from Ksh9 million, mainly because higher values were advanced during the year.
Lending remains highly concentrated. Nine institutions accounted for 90.6 percent of the market in December 2025. Seven large banks held 77.4 percent, while two medium sized banks held 13.2 percent.
In 2024, nine institutions held 89.9 percent. The split then was eight large banks with 81.6 percent and one medium sized bank with 8.3 percent.
KCB Bank Kenya led the field. Its mortgage book grew from Ksh91.5 billion to Ksh102.0 billion, giving it a 33.2 percent share.
Growth in borrower numbers was modest. Mortgage accounts rose by 746, or 2.5 percent, to 30,762 from 30,016. In other words, most of the growth came from larger loans rather than many more homeowners.
Asset quality tells a mixed story. The mortgage non-performing loan ratio eased slightly to 16.3 percent from 16.5 percent. Even so, it sat above the industry ratio of 16.0 percent in December 2025.
More borrowers also fell behind. Accounts classified as non-performing more than doubled, from 4,332 in December 2024 to 8,916 in December 2025, according to the report’s appendix data.
READ:
Banks named low incomes, high property prices and limited access to affordable long term finance as the biggest obstacles. Notably, these were the same top constraints as in 2024.
Yet the survey responses show other pressures rising. Complaints about the high cost of land for construction increased to 22 from 20. Difficulties with property registration and titling rose to 21 from 18. Incidental costs such as legal fees, valuation fees and stamp duty climbed to 19 from 17. Credit risk also rose to 19 from 16.
To ease these pressures, lenders proposed tax incentives for developers building low cost housing and the finalisation of land registry digitisation. They also called for lower stamp duty and transaction costs for first time buyers, wider mortgage education campaigns, standard mortgage documentation and better land administration and titling systems.
The Kenya Mortgage Refinance Company (KMRC) is playing a growing role. Ten institutions held KMRC refinancing in 2025, up from seven in 2024. Their outstanding facilities rose to Ksh19.6 billion from Ksh11.9 billion.
KMRC’s total assets grew 33.6 percent to Ksh43.2 billion. Its repayment tenure lengthened to 12.3 years from 11.71 years. Importantly, 48 percent of KMRC refinanced mortgages went to women.
Saccos have a direct stake. Eleven Savings and Credit Co-operative Organisations (Saccos) hold 7.5 percent of KMRC. KMRC also lends to participating banks and Saccos, which pass the benefit to members through fixed rate home loans.
Profits, however, fell. KMRC’s profit before tax dropped 24.9 percent, from Ksh1.82 billion to Ksh1.36 billion. CBK linked this to lower investment income in a low interest rate environment.
CBK expects the mortgage market to stay stable, with demand rising. It cited stabilising interest rates, more affordable housing units from government backed projects, faster land transactions through Ministry of Lands digitisation, and discounted long term funding from KMRC.
By Benedict Aoya
Get more stories from our website: Sacco Review.
For comments and clarifications, write to: Saccoreview@
Kindly follow us via our social media pages on Facebook: Sacco Review Newspaper for timely updates
Stay ahead of the pack! Grab the latest Sacco Review newspaper!
