The State-backed mortgage firm has offered KCB Group and Housing Finance Sh2.64 billion to offer homes loans with interest rates of less than 10 per cent.
The lower home loan rates are the product of the newly established Kenya Mortgage Refinance Company (KMRC), a Treasury-backed lender, which offers banks and saccos cash for onward lending to households.
KCB Group will receive Sh.2.13 billion and Housing Finance HFC (Sh514 million) while Stima Sacco and Nyandarua Towers Sacco have been offered Sh69 million and Sh29 million respectively.
KMRC will lend to banks and financial co-operatives at an annual interest of five per cent, enabling them to write home loans at less than 10 per cent — lower than the average lending rate of 11.92 per cent or 42 per cent cheaper.
Homebuyers in Nairobi metropolitan area — which extends to neighbouring Kiambu, Machakos and Kajiado — will access a maximum of Sh4 million in home loans while the mortgage backed by the refinance form for the rest of the country has been capped at Sh3 million.
This means individuals who qualify for the subsidised loans or those earning less than Sh150,000, will have to top up their loans with commercial credit should they seek a home above the Sh4 million.
KMRC chief executive Johnstone Oltetia said the refinancing firm expects KCB and Housing Finance to start lending immediately, saying the deal allows lenders to offer loans at a single digit.
“We will give priority to owner-occupier facilities to enable borrowers to use their rent money to repay mortgages faster, thereby reducing non-performing loans,” said the KMRC boss.
“We have a Sh25 billion World Bank kitty as well as a Sh10 billion line of credit ready for lending from the African Development Bank.”
The banks will have seven years to repay the KMRC loans.
The government owns a 25 per cent stake in KMRC, with the rest of the shares held by banks, saccos and microfinance institutions.
The role of KMRC is limited to mobilising cash for mortgages and cushioning the lenders from losses linked to defaults.
Mortgage firms have shied from writing housing loans, mainly due to a lack of long-term deposits in the industry to match them.
The KMRC will now feed the banks with long-term funding, reducing the lenders’ reliance on short-term loans.
Commercial banks in Kenya had only 27,993 mortgage accounts in their books worth Sh237.7 billion as at the end of 2019, according to the CBK data. The mortgage penetration rate, at only 2.7 per cent of gross domestic product (GDP), compares poorly to South Africa’s mortgage industry that makes up 31 per cent of GDP.