Determinants Of Mortgage Delinquency A Perception Survey Of Commercial Bank Mortgagors

Abstract

This study focused on a survey of the determinants of mortgage delinquency amongst commercial banks mortgagees in Kenya. Undoubtedly, financial systems and economic growth are strongly interlinked. It is therefore important to study and identify the causes of mortgage delinquency which ultimately has an effect on economic growth. The purpose of this study was to determine the determinants of mortage delinquency amongst commercial banks mortgagees in Kenya. The study sought to determine the relationship between mortgage individual characteristics and delinquency amongst commercial banks mortgagees in Kenya, to evaluate the relationship between mortgage specific characteristics on mortgage delinquency amongst commercial banks mortgagees in Kenya and to explore the role of mortgage characteristics on mortgage delinquency amongst bank mortgages in Kenya. The research adopted descriptive research design. The target population was 38 registered commercial banks in Kenya offering mortgages. The respondents were 2 senior financial officers in the mortgage department of each of the 38 banks. Due to the population size, a census approach was used. Primary data was obtained through self-administered questionnaires. The data was analysed using exploratory and confirmatory factor analysis. Quantitative analysis involved the use of pie charts, bar graphs, means and percentages to present the information. The processed data was presented in tables, graphs and explanation given in prose to explain determinants of delinquency amongst commercial banks mortgagees in Kenya. The study deployed inferential statistics that involved the use of ANOVAs and regression analysis to study the effect of independent variable on the dependent variables. The findings were presented using tables and figures. The study found that mortgage characteristics had the highest significant effect in mortgage delinquency followed by mortgage specific characteristic while mortgage individual characteristics had no effect on mortgage delinquency. Mortgage characteristic had a beta value (β1 = 2.005). This meant that on an integrated scale, a unit change in Mortgage characteristic resulted in a 2.005 positive change in mortgage delinquency. A unit change in mortgage specific characteristic (β2 = 1.359) would result in a 1.359 positive change in mortgage delinquency and finally a unit change in mortgage individual characteristic (β3 = -1.183) resulted in a negative change in mortgage delinquency. A conclusion can therefore be drawn from the study that mortgage characteristics and mortgage specific characteristics affect mortgage delinquency. The banks should involve the board’s credit committee in selecting and vetting the mortgage applicants. The bank’s credit committee should deploy bank rehabilitation process by calling clients to pay overdue mortgages. Interest rates charged on various types of mortgages should be able to cover the cost of the mortgage and meet good profit margin. The bank’s lending policy should be periodically reviewed to reflect the prevailing economic conditions. The lending authority and mortgage approval should be decentralized. Information from credit reference bureaus should be used in appraising the customer’s mortgages.