Affordable Housing: Kenyans to Get House Loans at Single Digit Interest Rates

Kenyan low-income earners are set to begin getting cheap house loans following the launch of Kenya Mortgage Refinance Company (KMRC).

The State-backed refinancing company was launched this week by President Kenyatta as part of the government's plan to deliver the affordable housing project.

KMRC will lend money to financial institutions including commercial banks, Saccos, and mortgage firms at low cost, enabling them to write home loans at lower interest rates.

Financial institutions receiving cheap loans from KMRC are expected to give mortgage loans at a single digit interest rate from the current market rate of about 13.5 percent.

Kenyan low-income earners seeking to buy houses in Nairobi will qualify for loans of up to Sh4 million while those outside the capital will get up to Sh3 million. Interest rates will be below 10 percent. 

“Since we are getting concessional loans, our proposal is that primary lenders should pass the benefits to the borrower by keeping interest rates at single digit,” said KMRC interim CEO Johnstone Oltetia.

“But our key focus is on tenure because it is what will eventually drive down the overall cost of a mortgage, the fact that more financial institutions will be offering long-tenure loans at fixed rates.”

The KMRC is expected to help increase the number of mortgages from the current 26,000 to more than 60,000 by the year 2022. 

“Once operational, KMRC will support a large number of credit-worthy potential borrowers who are not able to obtain loans at the moment,” said President Kenyatta during the launch of KMRC.

“It will be expected to provide fixed-rate, long term low-interest funding; and help reverse low mortgage penetration in Kenya.”

The secondary mortgage financier has several partners among them the National Treasury, seven commercial banks, World Bank and its subsidiary, International Finance Corporation (IFC) and mortgage lender HF Group

KMRC's interim board members include Treasury Principal Secretary Kamau Thugge, Stima Sacco chairman Osman Khatolwa, Housing Finance Company Group CEO Robert Kibaara and KCB Group’s nominated member Samuel Makome.