You Can Now Access Cheap Mortgage
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The Kenya Mortgage Refinance Company ( KMRC) has eased the criteria to access mortgages by increasing the income limit for borrowers. Following this significant update, borrowers with a monthly income of up to ksh200,000 can now enjoy cheap mortgage rates.
Johnstone Oltetia, KMFC Chief Executive Office, speaking on Thursday 15th, said that the income limit has been increased by sh50,000 in December 2023, amid the skyrocketing cost of living that has significantly reduced the spending powers of most homeowners.
What pushed the need for the threshold review?
Johnstone Oltetia, KMFC Chief Executive Office, speaking on Thursday 15th, 2024 said that the income limit has been increased by sh50,000 in December 2023, amid the skyrocketing cost of living that has significantly reduced the spending powers of most homeowners.
Such a change is highly beneficial to the middle class homeowners given that it comes at a time when commercial banks mortgage rates are becoming costlier with the newly announced Central Bank lending rates.
With the rising inflation alongside the increase in taxation, the majority of the workers are now finding it hard to spend on home ownership.
“We changed the income threshold from sh150,000 to sh200,000,” said Mr. Oltetia.
“This move was mainly due to the inflation that has hit the economy and reduced the spending power. We will continue to review the thresholds depending on how the market forces turn out.”
The KMRC-backed loans, with an average interest rate of 9.5 percent, have since 2020 been only accessible for workers with an income of sh150,000 each month. The review is an additional boost to any aspiring homeowner following the increase of the mortgage size to sh.10.5 million; a well-deserved move as the construction costs keeping rise.
KMRC is funded by The World Bank and the African Development Bank through the treasury at a fixed interest rate of 4.5 percent, and lends to participating mortgage lenders at an interest rate of 5%. On the other hand, the lenders are required to offer the mortgages to homebuyers at an interest rate of less than 10 percent.
The standard mortgages from commercial banks are now attracting an interest rate of up to 21 percent, a significant rise, following the newly announced Central Bank of Kenya’s benchmark rates.
The Central Bank of Kenya increased the base lending rate by 50 basis points from 12.5 percent to 13 percent, pushing banks to increase their interest rates for both mortgages and credit facilities.
KMRC, in its report, notes that it had issued over sh2.4 billion in mortgages to borrowers in 2023, with an average ticket size of sh3.1 million. All these monies were disbursed through Unaitas Sacco, Stima Sacco, Ukulima Sacco, NCBA Bank Kenya, and Stanbic Bank Kenya, with the repayment period for the above loans stretching up to 25 years.
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