Kenya Mortgage Refinance Company ups income limit for cheaper loans to Sh200,000
Kenya Mortgage Refinance Company has increased the monthly income limit for borrowers to Sh200,000.
What you need to know:
- The KMRC-backed loans, with an average interest rate of 9.5 per cent, have since 2020 been only accessible to workers who earn a maximum of Sh150,000 a month.
- The move is a win for the middle class at a time mortgages from commercial banks are getting costlier.
Kenyans 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 limit for borrowers.
KMRC chief executive officer Johnstone Oltetia yesterday said the ceiling was raised by Sh50,000 in December 2023, amid high living cost, which has eaten into the spending power of prospective homeowners.
The move is a win for the middle class at a time 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 purchase houses.
“We changed the income threshold and increased it to Sh200,000 from Sh150,000 from December last year,” Mr Oltetia told Business Daily yesterday.
“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 per cent, have since 2020 been only accessible to workers who earn a maximum of Sh150,000 a month. Review of the cap on the income band is the second win for prospective home buyers with KMRC having increased the mortgage size to Sh10.5 million to match the rise in house prices and construction costs.
KMRC accesses funds from the World Bank and the African Development Bank through the Treasury at a fixed interest of 4.5 per cent before on-lending to participating mortgage lenders at an interest rate of five per cent. Participating Primary Mortgage Lenders (PMLs) —banks and saccos— are required to charge homebuyers less than 10 per cent interest, with a repayment period of up to 25 years.
Standard mortgages from commercial loans attract interest rates of up to 21 per cent, having risen on the back of the jump in CBK’s benchmark rates.
The CBK last week increased the base lending rate by 50 basis points from 12.5 per cent to 13 per cent, setting the stage for banks to follow suit.
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.
KMRC is a critical cog in the government’s efforts to increase home ownership by offering less costlier mortgages compared to those offered by commercial banks.
