Banks make 4.5pc margin on cheaper mortgages scheme

Kenya Mortgage Refinance Company [KMRC] Chief Executive Officer Johnstone Oltetia. PHOTO | JEFF ANGOTE | NMG

Commercial banks and saccos added an average margin of 4.5 percent on funds obtained under a State-backed affordable housing plan, according to the Kenya Mortgage Refinance Company (KMRC).

Seven financial institutions got Sh1.34 billion from KMRC after it started disbursing funds for onward lending to home buyers last year, the firm says in its annual report for 2021.

The mortgage refinancing firm, incorporated to derisk access to home loans for workers earning up to Sh150,000 a month, offers funds to banks and saccos for onward lending at an annual interest of five percent.

The recipient lenders are, in turn, expected to lend out the cash to home buyers for single-digit interest rates.

“The average lending rate is 9.5 percent per annum fixed for the tenor of the (home) loans,” KMRC told the Business Daily in regard to funds disbursed last year.

The rate is lower than the average commercial bank lending rate of 12.2 percent as of May.

Prospective home buyers who qualify for home loans under the KMRC framework access up to Sh4 million for property in the Nairobi metropolitan area and Sh3 million elsewhere, with a repayment period of up to 20 years. The KMRC funding covered 574 home loans last year, putting the average mortgage size at Sh2.34 million.

The overall industry’s average mortgage size last year increased to Sh9.2 million from Sh8.5 million previously, the Central Bank of Kenya data shows, locking out low- to mid-income workers from a thin market of 26,723 home loan accounts worth Sh232.7 billion.

Co-op Bank, which accounted for 5.6 percent of the residential mortgages market last year, tapped the highest amount from KMRC at Sh550 million, followed by HFC (Sh515 million).

Others were Unaitas Sacco (Sh116m), Stima Sacco (Sh69m), Credit Bank (Sh52m), Tower Sacco (Sh30m), and Ukulima Sacco (Sh12m).

“The focus for KMRC is to help drive down the rates so that we have low rates and longer tenors. So we are trying to help people who are at lower income levels to get financing for housing,” KMRC chief executive Johnstone Oltetia said earlier.

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