Civil servants face raise in mortgage rate to 7 per cent
Civil servants houses in Ngara, Nairobi. Terms for those who have taken government loans under the civil servants scheme in previous years will not be altered. PHOTO | FILE
What you need to know:
Civil servants who have taken up the government’s mortgages currently pay three per cent in interest rates and a further two per cent to cater for costs of the scheme administrator.
Regulations gazetted by the State indicate that the management costs for the scheme administrator would double from two to four per cent, taking the total cost to seven per cent.
Even at seven per cent, the cost would be significantly lower than the average 16 per cent interest rate charged by commercial banks for mortgages.
Civil servants face an increase in their monthly repayments for mortgages, with the total cost payable set to rise from five to seven per cent.
Civil servants who have taken up the government’s mortgages currently pay three per cent in interest rates and a further two per cent to cater for costs of the scheme administrator.
The management cost usually goes to banks to whom the government has outsourced the administrative role.
Regulations gazetted by the State indicate that the management costs for the scheme administrator would double from two to four per cent, taking the total cost to seven per cent.
“Regulation 19 of the Principal Regulations is amended by deleting the expression “two per centum” substituting therefore the expression “four per centum”,” says the gazetted amendments dated February 12 by Lands secretary Charity Ngilu before her suspension from Cabinet.
A senior ministry official, however, told the Business Daily that the gazetted regulations were only in draft form and would be amended to cap the rate at no more than five per cent.
“The issue of the management fee will depend on the banks (which manage the mortgage scheme). The banks which will manage the mortgage scheme are asking for 2-2.5 per cent,” said director of estates Patrick Bucha.
“The total should be five per cent; so we have about 2.5 - 3 per cent in interest rate and 2 - 2.5 per cent in the management fee.”
Currently, KCB and Housing Finance manage the civil servants mortgage scheme although more banks could be brought in to cater for the expected growth in number of loans taken.
Even at seven per cent, the cost would be significantly lower than the average 16 per cent interest rate charged by commercial banks for mortgages.
Terms for those who have taken government loans under the civil servants scheme in previous years will not be altered.
Other expected amendments will see the committee administering the mortgage fund also cater for those of State Officers under the Public Service Commission, which are currently administered by the Treasury.
Under the revamped mortgage plan unveiled earlier in the year by Treasury secretary Henry Rotich, civil servants will access mortgages of between Sh4 million and Sh25 million to be repaid in 20 years under a check-off system.
Top State Officers such as governors, Cabinet secretaries, secretary to the Cabinet, the attorney-general, the chief of the Kenya Defence Forces and the auditor-general can borrow up to Sh40 million for a mortgage.
Principal secretaries, chair and members of independent commissions and the controller of budget will get up to Sh35 million as mortgage.
The director-general of the National Intelligence Service, inspector-general of police, vice-chief of KDF, commanders of Kenya Army, Kenya Navy and Kenya Air Force and the director of public prosecutions will get up to Sh30 million.
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