Housing Finance registered a 2.7 per cent drop in profit during the nine-month period ended September 30. The mortgage lender’s profit after tax (PAT) fell to Sh396 million from Sh407 million in a similar period last year. HF blamed the drop in earnings to a high cost of funding environment, which saw the firm’s total interest expenses jump by 123 per cent to Sh2.35 billion from Sh1.05 billion. In a statement yesterday Managing Director Frank Ireri said the scramble for players to keep pace with credit growth in a high cost of funding environment led to an increase in interest rates for borrowers in the market. “The results for the third quarter are on the whole pleasing given the continued difficult trading environment. The period was quite difficult for our customers who were exposed to the rising cost of credit,” said Ireri. The firm’s total interest income increased by 52 per cent to Sh3.71 billion, up from Sh 2.44 billion while total operating expenses declined four percent to Sh 999 million from Sh1.03 billion. Customer deposits rose 29 percent to Sh 24.01 billion from Sh18.65 billion in a similar period last year. Loans and advances increased 26 per cent to Sh28.8 billion from Sh 22.9 billion. Similarly, Gross Non Performing Loans (NPLs) grew by 26 per cent to Sh1.97 billion from Sh1.57 billion due to a rise in interest rates. “Customers who were experiencing difficulties servicing at 23 per cent are now comfortably servicing at 18 per cent and hence improving quality of the book,” said Ireri.” Ireri also noted that the increase in NPL was also as a result of the new Land laws that stipulate the period that must lapse before a foreclosure process can be initiated which is in contrast to what was there previously.