Why Are Mortgage Rates Higher in Kenya Than in the USA?

Why does a country with a much larger economy like the USA have lower mortgage rates than Kenya
The CBK's policy rate also influences borrowing costs across the economy.
In the USA, lenders can sell many eligible mortgages into financial markets, including through mortgage-backed securities.
If you are planning to buy a home, waiting for interest rates to fall may seem like the obvious choice. But there is no certainty about when rates will decline or by how much.

Mortgage interest rates in Kenya averaged 14.9% in 2024, according to the Central Bank of Kenya (CBK). In the USA, the average rate for a 30-year fixed mortgage was 7.40% on 8 October 2026.

That is a significant difference. And it raises an important question: why does a country with a much larger economy like the USA have lower mortgage rates than Kenya, where many people are already struggling to afford a home?

After all, buying a home is expensive enough. Between saving for a deposit, finding a property within your budget and managing everyday expenses, taking on a mortgage at an interest rate of 14% or more can make homeownership feel out of reach.

So, what explains the difference, and could mortgage rates in Kenya come down?

What does the difference mean for homebuyers?

Consider a KSh5 million mortgage repaid over 20 years. At an annual interest rate of 14%, the monthly repayment would be approximately KSh62,200. At 7%, it would be about KSh38,800.

That is a difference of more than KSh23,000 every month.

These are illustrative estimates that exclude fees and insurance, but they show how much interest rates can affect affordability. For many households, the difference could determine whether buying a home is realistic.

Why are mortgage rates higher in Kenya?

1. Borrowing money costs banks more

Banks need money to lend, and obtaining that money comes at a cost. They consider customer deposits, other funding sources, operating expenses and the returns they could earn from alternative investments when setting lending rates.

In Kenya, these costs can make long-term loans more expensive.

The CBK's policy rate also influences borrowing costs across the economy. When the rate falls, banks may have room to reduce lending rates, although mortgage rates do not automatically fall by the same amount.

2. The USA has a more developed mortgage market

One major difference is how home loans are financed.

In the USA, lenders can sell many eligible mortgages into financial markets, including through mortgage-backed securities. Organisations such as Fannie Mae and Freddie Mac help support this system, making long-term home loans more widely available.

Kenya's mortgage market is much smaller and relies heavily on banks to provide financing. Access to affordable, long-term funding remains a challenge.

This matters because a bank providing a 20-year mortgage needs reliable funding to support that loan. When long-term funding is expensive or limited, offering lower interest rates becomes more difficult.

So, while the size of the American economy matters, the way its mortgage system works is also a major part of the explanation.

3. Banks must account for lending risks

A mortgage can run for 15 or 20 years. During that time, a borrower's income can change, property prices can fluctuate and unexpected financial difficulties can arise.

Banks consider these risks when deciding how much interest to charge.

In Kenya, assessing borrowers with irregular incomes can be challenging, while property valuation, legal processes and recovering loans after default can add to lending costs.

These challenges do not mean every Kenyan borrower is risky. However, lenders must account for the overall costs and risks of their mortgage portfolios.

4. Economic conditions are different

Inflation, government borrowing and financial market conditions also influence interest rates.

In the USA, mortgage rates are influenced by long-term government bond yields and investors' expectations about inflation and future interest rates. They do not simply follow the Federal Reserve's policy rate.

Kenya operates under different economic conditions, which affect the cost of funding and the returns lenders expect.

This is why mortgage rates in the two countries do not necessarily move in the same direction or by the same amount.

Why is this a problem for ordinary Kenyans?

High interest rates make it more expensive to finance a home, particularly when household incomes are already stretched.

The CBK's 2024 residential mortgage survey recorded 30,016 outstanding mortgage loans in Kenya, with an average loan size of KSh9 million. The average mortgage interest rate was 14.9%.

These figures highlight how limited the formal mortgage market remains.

There is also a difficult cycle at play. High borrowing costs make mortgages unaffordable for more households, limiting the number of people who can access home loans. Expanding the market requires more affordable financing, but that depends partly on addressing the funding and structural challenges that keep borrowing costs high.

And lower mortgage rates alone will not solve everything. Property prices, deposits and household incomes also determine whether people can afford to buy.

Can mortgage rates in Kenya come down?

Yes. But it will take more than a single reduction in the CBK's policy rate.

If inflation remains manageable and the cost of credit falls, banks may reduce their lending rates. More affordable long-term funding, greater competition between lenders and a deeper mortgage financing market could also help.

Improving credit information and property registration processes could reduce some of the costs associated with lending. More flexible mortgage products could also help people with irregular incomes access financing, provided repayments remain affordable.

However, there is no guarantee that Kenya's mortgage rates will reach American levels. The two countries have different financial systems and economic conditions.

What should homebuyers do?

If you are planning to buy a home, waiting for interest rates to fall may seem like the obvious choice. But there is no certainty about when rates will decline or by how much.

In the meantime, compare mortgage offers from different lenders, understand whether rates are fixed or variable, and check the additional fees involved.

Most importantly, work out what you can comfortably afford to repay each month rather than focusing only on the property price.

The bottom line

The USA's lower mortgage rates are not simply a result of having a bigger economy. Its established mortgage financing system, access to long-term funding and financial market structure also play important roles.

Kenya's rates can come down, but making homeownership more accessible will require improvements in how mortgages are funded, priced and offered.

Because finding a home you like is only half the journey. Being able to afford the repayments is what makes owning it possible.

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