Kenya’s Mortgage Market Is Showing Signs of Recovery — But Buying a Home Is Still Expensive

Kenya's mortgage market is showing signs of renewed activity as borrowing costs have declined and outstanding home loans increased during 2025.

But the recovery is taking place against a difficult affordability backdrop.

The latest data from the Central Bank of Kenya (CBK) shows that outstanding mortgage loans increased by KSh27.9 billion, or 10%, to KSh307.2 billion by December 2025, from KSh279.3 billion a year earlier.

At the same time, the average mortgage interest rate declined from 15.2% to 13.5%, while the average mortgage size increased from KSh9 million to KSh10 million. (Business Daily Africa)

The figures suggest that lower borrowing costs may be helping the mortgage market recover.

But there is another side to the story.

A mortgage becoming cheaper does not necessarily mean a house has become affordable.

The cost of borrowing is moving in the right direction

The Central Bank of Kenya has progressively reduced its Central Bank Rate over the past two years.

As of 11 August 2026, the CBR stood at 8.75%, down from 10.75% in February 2025. (Central Bank of Kenya)

CBK's June 2026 Monetary Policy Statement also reported that the weighted average lending rate had declined to 14.4% in June 2026, from 14.8% in December 2025.

At the same time, private-sector credit growth strengthened to 10.6% in June 2026, compared with 5.9% in December 2025. (Central Bank of Kenya)

That combination matters to the property market.

Mortgage financing depends heavily on the cost and availability of credit.

When borrowing becomes less expensive, some households that previously could not qualify for financing may become more capable of servicing a loan.

Mortgage growth is happening alongside lower rates

The CBK's 2025 banking-sector data provides another important signal.

Outstanding residential mortgages increased by approximately 10% during 2025, reaching KSh307.2 billion.

The average mortgage size also increased by 11.1% to KSh10 million, while the average repayment period increased from 11.1 years to 11.5 years. (Business Daily Africa)

This means the mortgage market is not simply seeing more borrowing.

The typical loan size and repayment period are also changing.

For borrowers, a longer repayment period can reduce the monthly payment compared with an otherwise identical shorter loan, although it can increase the total interest paid over the life of the loan.

That distinction is important when comparing mortgage offers.

But affordability remains the central problem

Despite the improvement in mortgage activity, Kenya's housing-finance market continues to face structural obstacles.

The CBK's 2025 mortgage market survey asked banks and mortgage-finance institutions about the major obstacles facing the sector.

The leading obstacles identified included:

• Low levels of income

• High cost of property purchase

• Limited access to affordable long-term finance

• High cost of land for construction

• Difficulties with property registration and titling

• Incidental transaction costs

• Credit risk

CBK reported that low income, high property-purchase costs and limited access to affordable long-term finance remained the major constraints identified by institutions. (Central Bank of Kenya)

This creates an important contradiction in the housing market.

Credit can become cheaper while housing remains unaffordable.

That is because the affordability equation is not determined by interest rates alone.

The real calculation is bigger than the mortgage rate

Consider a prospective buyer looking at a KSh10 million property.

The buyer doesn't simply need to ask:

“What is the mortgage interest rate?”

They need to understand the entire cost structure.

That includes:

Property price

Deposit

Legal costs

Valuation

Stamp duty and transaction costs where applicable

Mortgage-related charges

Insurance

Monthly loan repayment

Maintenance/service charges

Other ownership costs

The actual financial burden can therefore be significantly different from the advertised property price.

Why falling rates matter to property investors

For an investor, financing costs can significantly affect returns.

Suppose two investors purchase similar properties.

Investor A finances the purchase when borrowing costs are high.

Investor B obtains financing at a lower rate.

Even if both properties generate identical rental income, their cash-flow positions can differ because the financing cost is different.

This is why changes in monetary policy can eventually affect property markets.

However, the transmission is not immediate or uniform.

A reduction in the Central Bank Rate does not mean every mortgage automatically falls by the same percentage.

Borrowers need to examine the actual terms offered by their lender.

What about people building instead of buying?

The mortgage market is only one side of Kenya's property-finance equation.

Construction costs also matter.

The latest KNBS Construction Input Price Index shows that construction input prices increased 5.73% between Q1 and Q2 2026, while construction inflation was 5.52% year-on-year in Q2 2026. (KNBS Repository)

That means a household deciding to purchase land and construct a home must consider another variable:

The cost of building itself is still moving.

For developers, increasing construction costs can affect project feasibility, selling prices and expected margins.

For individuals, construction budgets need sufficient contingency rather than assuming that today's estimate will remain unchanged throughout a long project.

Kenya's property market therefore has two different affordability questions

QUESTION ONE:

Can a buyer obtain financing?

And:

QUESTION TWO:

Can the buyer comfortably afford the property and all associated costs?

Those are not the same question.

A bank approving a mortgage does not necessarily mean the property is financially comfortable for the borrower.

A responsible buyer should consider income stability, emergency savings, existing debt, household expenses and the consequences of a change in income before taking on a long-term property obligation.

What buyers should examine before taking a mortgage

Before signing a mortgage agreement, a prospective homeowner should understand:

1. The interest-rate structure

Is the rate fixed, variable or linked to a benchmark?

2. The repayment period

A longer term may reduce monthly payments but can increase total interest.

3. Early repayment conditions

Check whether additional payments or early settlement attract charges or restrictions.

4. All fees

Don't compare mortgages using interest rates alone.

5. Insurance requirements

Understand what insurance is required and who provides it.

6. Property valuation

The lender's valuation can affect how much it is willing to finance.

7. Title and documentation

The property must satisfy the lender's legal and security requirements.

8. Monthly affordability

Calculate the payment alongside all household expenses—not in isolation.

The bigger picture for Kenya's housing market

The latest figures paint a mixed but important picture.

On one side:

Interest rates have declined.

Mortgage lending has increased.

Private-sector credit growth has strengthened.

Construction and real-estate activity remain significant parts of economic activity. (Central Bank of Kenya)

On the other:

Property remains expensive relative to many household incomes.

Access to affordable long-term finance remains a constraint.

Land and construction costs remain significant.

Titling and transaction processes can add friction. (Central Bank of Kenya)

The result is a housing market where improved financing conditions may support demand, but where affordability remains a fundamental issue.

PROPERTY JOURNAL ANALYSIS

Kenya's mortgage market appears to be entering a period of greater activity after the contraction experienced in 2024.

The combination of declining lending rates and increased outstanding mortgage balances is significant.

But the data should not be interpreted as evidence that Kenya has suddenly solved its housing-finance problem.

It has not.

The more interesting question is whether lower borrowing costs can continue translating into increased access to home ownership while property prices, land costs and construction expenses remain elevated.

That is a question worth watching over the coming quarters.

INVESTOR'S TAKEAWAY

The Kenyan mortgage market is showing measurable signs of recovery.

Outstanding mortgages reached KSh307.2 billion at the end of 2025, while the average mortgage rate reported by CBK declined to 13.5% and the average loan size increased to KSh10 million. (Business Daily Africa)

Meanwhile, the Central Bank Rate is currently 8.75%, and CBK reported continued improvement in private-sector credit growth during the first half of 2026. (Central Bank of Kenya)

But the affordability challenge remains.

For buyers, the lesson is not simply to watch interest rates.

Watch the entire property-finance equation.

Primary sources

• Central Bank of Kenya — Central Bank Rate (Central Bank of Kenya)

• Central Bank of Kenya — June 2026 Monetary Policy Statement (Central Bank of Kenya)

• Central Bank of Kenya — Bank Supervision Annual Report 2025 (Central Bank of Kenya)

• KNBS — Construction Input Price Indices, Q2 2026 (KNBS Repository)

• KNBS — Real Estate Survey (Kenya National Bureau of Statistics)

Need help evaluating a property before buying?
Big Step Property Agency Limited assists clients with property buying, selling, letting and property marketing.
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Editorial note: Mortgage rates, lending conditions and construction costs change over time. Figures in this article are tied to the periods stated and should not be interpreted as a quotation for any particular borrower or lender.