State-backed mortgage firm to lend at seven percent

National Treasury building in Nairobi. FILE PHOTO | NMG Kenyans earning Sh150,000 and below per month will from April get house loans from local banks and saccos at an annual subsidised interest of seven percent or nearly half the prevailing market rates.

The cheap mortgages are the product of the new established Kenya Mortgage Refinance Company (KMRC), a Treasury-backed lender, which offers banks and saccos cash for onward lending to households.

KMRC will lend money to financial institutions at an annual interest of five percent, enabling them to write home loans at seven percent—lower than market rate of 12.9 percent.

“We will then disburse the money to various banks and saccos from April at highly concessional rate of five percent,” Treasury Secretary Ukur Yatani told Parliament Thursday.

“The banks or saccos will then disburse the money to applicants wishing to purchase affordable housing at not more than seven percent.”

Mr Yatani said Kenyans who opt to buy their houses under KMRC will qualify for loans of up to Sh4 million with a repayment period of up to 20 years.

This will commit home buyers to a monthly mortgage repayment of Sh31, 000 over the 20 years, down from Sh46, 863 on market rate.

KMRC, which has so far mobilised Sh37.2 billion – Sh2.2 billion in equity capital, Sh25 billion committed by the World Bank and Sh10 billion from African Development Bank – has plans to raise an extra Sh5 billion from the capital markets.

The non-deposit taking KMRC plans to issue bonds at the capital markets and mobilise more funds from international development institutions.

It is 20 percent owned by the Treasury with eight commercial banks, 11 deposit-taking saccos and one micro financial institution holding a combined 80 percent stake.

Mortgage firms have shied away from writing housing loans mainly due to lack of long-term deposits in the industry to match them.KMRC will now feed the banks with long-term funding, reducing the lenders reliance on short term loans.The funding is expected to drive the number of mortgage accounts to an estimated 60,000 by 2022.Commercial banks in Kenya had only 26,504 mortgage accounts in their books worth Sh224.8 billion as at the end of 2018, according to Central Bank of Kenya data.The mortgage penetration rate, at only 2.7 percent of gross domestic product (GDP), compares poorly to South Africa’s mortgage industry that makes up 31 percent of GDP.Kenyans earning more than Sh150,000 per month will, however, continue to borrow house […]

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