Take-up of 1 million mortgages a dream without rate cuts and government intervention

• At current interest rates, half of all Kenyans could not afford the loan repayments for a house priced at Sh750,000

• The biggest blockage to mortgage take-up remains high interest rates from the main lenders

• The Deputy President has called for the country to achieve 1m  mortgages, up from today’s 20,000

• However, the main mortgage market players have all maintained mortgage rates in the 15 to 18 per cent range, with most rates remaining unchanged in 2014

• KCB has unveiled a promotion offering a rate of 14.5 per cent until June 2014

• Commercial Bank of Africa cut its rates from 17 per cent to 15 per cent, fixed for 4 years

• Barclays Bank reduced its rate from 15.5 per cent to 14.9 per cent

• But Standard Chartered Bank remains the lowest cost lender at an unchanged 13.9 per cent

• Options to achieve affordable mortgages now rest on new policies and funds

The Mortgage Company and Hass Consult today unveiled the Mortgage Report for the first quarter of 2014 showing that commercial banks have substantially maintained their unusually high borrowing rates, despite the growing impact on the housing market and on Kenya. 

The Deputy President has now called for an enabling environment to allow Kenya to achieve one million mortgages, up from today’s 20,000, but the rates of most of the main mortgage lenders remained unchanged, said Ms Carole Kariuki, Managing Director of the Mortgage company. Despite some minor adjustments and short-term interest rate discounts, standard Chartered Bank remained the lowest cost lender at an unchanged 13.9 per cent

rate. The most expensive mortgages are offered by Consolidated Bank at 19 per cent, while

Chase Bank is the only bank to negotiate counter rates with individual clients in a range between 16.5 per cent and 19 per cent.

“With the mainstream lenders hanging on with such tenacity to such high margins on their lending, the delayed take-off in Kenya’s mortgage market is distorting the country’s housing range, discouraging private developers, and locking out all bar the elite from home ownership,’ said Ms Kariuki.

“In the absence of any more constructive approach from the commercial lenders, mortgage take-up now depends on government intervention, either through supporting mortgage backed securities to stimulate the secondary mortgage market, or through the creation of housing funds and even mortgage subsidies.” Data compiled for the Mortgage Report shows that just 1 per cent of urban Kenyans can currently afford the mortgage repayments for a house priced at Sh5.7m, and a further 4 per cent for a house priced at Sh3.9m. Half of all urban Kenyans could not afford the loan repayments to buy a house at KSh700,000.