The Co-operative Bank has launched a 15-year mortgage loan as the lender eyes the State-backed affordable housing market.
The home loan —which is being de-risked by the Kenya Mortgage Refinance Company (KMRC)— will be given at a single digit of 9.9 percent as part of the government’s objective of making home ownership affordable.
“The affordable mortgage has been crafted after many months of negotiations and consultations with key housing stakeholders including savings & credit co-operative societies (saccos), housing & investment cooperatives and property developers,” the bank said in a statement.
Expensive home loans, owing to a number of factors including the high cost of land, low levels of income and limited access to affordable long-term finance, have curtailed the development of the mortgage market in Kenya.
As a result, the government together with the World Bank, lenders and other financial institutions, teamed to form KMRC, which is disbursing loans to primary lenders such as banks in the form of long-term funds, with the goal of unlocking affordable home loans for Kenyans.
Already, Co-op Bank has received Sh549 million from KMRC which it will top up with counterparties’ funding to create a kitty for on-lending to customers.
Only Kenyans earning a maximum of Sh150,000 in a month are eligible for the loans, an indicator that the end goal is to increase homeownership among the middle class.
The maximum loan amount, for a house in the Nairobi Metropolitan, is capped at Sh6 million while those outside will receive a maximum of Sh5 million.
“Additional financing solutions will be made available to landlords, contractors and developers to facilitate a coordinated sector-wide response towards the provision of affordable housing as long-desired by many households in Kenya, and as a key agenda for the Government of Kenya,” read the statement.
KMRC recorded a fourfold jump in its loan book to Sh6.8 billion in the year to December 2022, pointing to the corporation’s increased capacity to finance cheap homes after locking in additional capital.
The total value of mortgage loans outstanding was Sh245.1 billion in December 2021, as compared to Sh232.7 billion in December 2020, according to a report from the Central Bank of Kenya.
CBK attributed the increase to higher values of mortgages granted in 2021.