KMRC eases access to cheap mortgage for top earners

Kenya Mortgage Refinance Company (KMRC) Chief Executive Officer Johnstone Oltetia. FILE PHOTO | JEFF ANGOTE | NMG

Workers with a monthly income of up to Sh200,000 can now tap the Kenya Mortgage Refinance Company (KMRC) loans after the State-backed lender increased the income limit for borrowers.

KMRC chief executive officer Johnstone Oltetia on Thursday said the income limit was raised by Sh50,000 in December 2023, amid the skyrocketing cost of living that has eaten into the spending power of prospective homeowners.

The move is a win for the middle class at a time when mortgages from commercial banks are getting costlier in the wake of upward reviews of the benchmark lending rate by the Central Bank of Kenya.

A combination of rising inflation and increased taxation continues to batter workers’ payslips, in turn squeezing their spending power and hurting their ability to go for sizable loans to buy houses.

“We changed the income threshold and increased it to Sh200,000 from Sh150,000 from December last year,” Mr Oltetia told Business Daily on Thursday.

“This was mainly due to the inflation that has hit the economy and now reduced spending power. We will continue to review the thresholds depending on how the market forces turn out.”

The KMRC-backed loans, with an average interest rate of 9.5 percent, have since 2020 been only accessible to workers who earn a maximum of Sh150, 000 a month. A review of the cap on the income band is the second win for home buyers with KMRC having increased the mortgage size to Sh10.5 million to match the rise in home prices and construction costs.

KMRC gets funds from the World Bank and the African Development Bank through the Treasury at a fixed interest of 4.5 percent before on-lending to participating mortgage lenders at an interest rate of five percent.

Participating primary mortgage lenders —banks and saccos— are required to charge homebuyers less than 10 percent interest, with a repayment period of up to 25 years. Standard mortgages from commercial loans attract interest rates of up to 21 percent, having risen on the back of the jump in Central Bank of Kenya's benchmark rates.

The CBK last week increased the base lending rate by 50 basis points from 12.5 percent to 13 percent, setting the stage for banks to increase the interest rates of their credit facilities including mortgages.

KMRC says that it had disbursed Sh2.4 billion worth of mortgages to borrowers last year alone, with the average ticket size at Sh3.1 million.

The Sh2.4 billion was disbursed through Stanbic Bank Kenya, NCBA Bank Kenya, Safaricom Sacco, Unaitas Sacco, Ukulima Sacco and Stima Sacco.

The repayment period of the loans stretches up to 25 years, with the PMLs required to charge borrowers an interest rate of less than 10 percent.

KMRC is a critical cog in the government’s efforts to increase homeownership by offering less costlier mortgages compared to those offered by commercial banks.

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