Middle- and low-income earners will now be able to purchase and own home following the recently announced subsidised mortgage rates.
According to a local daily, earners who fall in the 150,000 and below the income threshold, are expected to start getting house loans from local banks and SACCOs at an annual subsidized interest of seven percent or nearly half the prevailing market rates, as from next month.
The low mortgage rates are a 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.
KMRC is a product of a closely-knit collaboration between the Kenyan Government and local banks, SACCOs, and microfinance institutions.
The body will lend money to financial institutions at an annual interest rate of five percent, enabling them to write home loans at seven percent, lower than average market rate of 11.95 percent making it 42% cheaper.
Further, KMRC plans to issue bonds at the capital markets and mobilize more funds from international development institutions. Mortgage firms have shied away from writing housing loans, mainly due to a lack of long-term deposits in the industry to match them.
KMRC will now feed the banks with long-term funding, reducing the lenders’ reliance on short-term loans, hence bridging the gap that has long prevented low earners from getting home loans.