GDP Growth Rate on the Growth of Mortgage Financing in Kenya

Abstract

Purpose: The current study, sought to establish the effect of GDP growth rate on the growth of mortgage financing in Kenya. The study was grounded on the Classical Growth Theory. Design/ methodology/ approach: The study took a quantitative approach drawn from the positivism research philosophy. Therefore, the study was a time series research design which was used to track the growth of mortgage financing in Kenya for the last 20 years – from the year 2002 to 2021. The study targeted the time-series quarterly data from CBK for the last 20 years. Items to be collected included the following: average quarterly GDP growth rate and quarterly growth of mortgage financing. The study used secondary data which was extracted from CBK quarterly data reports website for the period 2002 to 2021. The quantitative secondary data was analyzed by use of descriptive and inferential statistics. A 95% confidence interval was the statistical error variance used. Data was coded and analyzed using STATA 14 (or EViews 14.0). Findings: The findings revealed that GDP growth rate and growth of mortgage financing in Kenya are positively and significantly related (β = 0.380, p=0.001). This implies that an increase in GDP growth rate results in an improvement in the growth of mortgage financing by 0.255 units and vice versa. Unique contribution to theory, policy and practice: CBK should implement the appropriate monetary policy instruments to ensure improvement in the GDP growth rate. This is because its relationship to the growth of mortgage financing in Kenya has been found to be positive and significant. Thus, the growth of GDP ought to be closely monitored for effective generation of wealth for the financing of mortgages in Kenya