Kenya eyes lower mortgage rates
The Kenyan government is negotiating with local banks to reduce the interest lenders charge on mortgages to single digits as authorities try to make buying a home affordable in East Africa's biggest economy.
Talks with the banks were under way, spokesman David Mugonyi quoted Deputy President William Ruto as saying, without giving a timeline for when the government wanted the single-digit interest rates to be achieved.
The housing shortage in Kenya, a country of 43 million, is estimated at 150,000 to 200,000 homes in urban and more than 300,000 in rural areas. The government and private developers provided about 30,000 homes a year, well short of demand, said Shelter Afrique, the pan-African housing finance agency.
"Affordable home ownership is still a pipe dream for most Kenyans," said HassConsult, a Nairobi-based real estate consultancy. "The high land prices and high cost of infrastructure coupled with the developers' need to make profits keep most homes out of reach for most Kenyans."
Barclays' Kenyan unit charges the lowest rate for a mortgage, at 15.5 per cent, while Chase Bank Kenya asks the most, at 22 per cent, said HassConsult.
Kenya Commercial Bank, East Africa's biggest lender, was seeking to increase loans for homeowners in a market where there were only about 30,000 mortgages, chief executive Joshua Oigara said in August. Kenyan mortgage lending accounted for about 6 per cent of bank loans, compared with about 25 per cent in South Africa, he said.
Projections indicated that if the momentum on reducing interest rates was maintained, mortgage rates might drop below 10 per cent by the end of the year, said Habil Olaka, the Kenya Bankers Association's chief executive.
"The progress is a result of the measures that were put in place after consultations between the National Treasury, central bank and the association," he said.