The Kenya Mortgage Refinance Company (KMRC) has announced plans to enable Kenyans earning KSh150,000 and below per month to start getting house loans from local banks and SACCOs at an annual subsidised interest of 7%, nearly half the prevailing market rates.
The plan, set to start in September 2020, will see KMRC lend money to financial institutions at an annual interest of 5%, enabling them to write home loans at 7%—lower than the average market rate of 11.95%.
Prospective buyers will qualify for mortgages of up to KSh 4 million with a repayment period of up to 20 years. This will commit the buyer to a monthly repayment of KSh31,000 for 240 months, down from KSh46,863 on the prevailing market rates.
KMRC will now feed the banks with long-term funding, reducing the lenders’ reliance on short-term loans. The funding is expected to drive the number of mortgage accounts to an estimated 60,000 by 2022, which translates to about 12,000 additional accounts per year.
However, Kenyans earning more than Sh150,000 per month will continue to borrow house loans at market rates, with the role of KMRC being limited to mobilising more cash for mortgages and cushioning the primary lenders from losses linked to defaults.
KMRC is 20% owned by the Kenyan government with 11 deposit-taking SACCOs, eight commercial, and one micro-financial institution holding a shared 80% stake. Its board of directors has been in place since July last year.
KMRC has so far mobilised nearly KSh40 billion, including KSh2.2 billion in equity capital, KSh25 billion committed by the World Bank and KSh10 billion from African Development Bank (AfDB).