MORTGAGE FINANCING, MACRO ECONOMIC VOLATILITY AND ECONOMIC GROWTH OF EAST AFRICA COMMUNITY COUNTRIES

Abstract

Mortgage financing is a critical part of financial systems that contribute to financial markets development
and deepening and has potential positive effects on a country’s financial and economic growth. An effective
mortgage market guarantees long-term returns since it entices investors. Moreover, borrowers have better
access to funds when the market is efficient, and this aids in stimulating economic growth. However, most
financial institutions attach myriad of conditions and covenants which impede mortgages access which
negatively affects mortgage credit to GDP ratio. Further, various macroeconomic fluctuations such as
interest rates fluctuation, inflationary conditions and currency fluctuations adversely affects mortgage
lending and economic development. The study looked into the moderating effect of macroeconomic volatility
on the relationship between mortgage financing and economic growth of EAC member countries. The theory
of investment multiplier, new neoclassical economics, financial intermediation, and structural form theory
were used in this research. The researcher utilized a positivist research philosophy and both a descriptive
and explanatory research designs. Descriptive statistics, correlation analysis, and panel data model
estimations were conducted. According to the research, interest rate volatility and exchange rate volatility
had no significant moderating influence on the link between mortgage financing and the economic growth of
EAC member countries while inflation rate volatility had a significant moderating influence. Also, mortgage
financing and macroeconomic volatility significantly influence the economic growth of EAC member
countries. Further, the study results inferred that mortgage financing significantly affects economic growth,
inflation rate volatility moderates the relationship between mortgage financing and economic growth of EAC
member countries, interest rate volatility and exchange rate volatility did not significantly moderate the
relationship between mortgage financing and economic growth of EAC member countries. The study
recommends the need for policy makers to stabilize the inflation levels prevailing in EAC member countries.
Keywords: Mortgage Financing, Macroeconomic volatility, Economic Growth .