, NAIROBI, Kenya, Dec 2 – Kenyans wishing to take up mortgages with Housing Finance will now be required to repay their home loans at a rate of 23 percent.
This follows the decision by the mortgage financier to raise its lending rate to reflect the continued hike in the Central Bank of Kenya’s indicative lending rate which currently stands at 18 percent.
Housing Finance Managing Director Frank Ireri however said the lending rate for existing customers will only be adjusted upwards by 2.5 percent to 16.5 percent as they seek to lessen the burden on their clients.
“Despite Central Bank increasing its lending rate by 11 percent over the last two months, we have decided to only increase our rate for existing customers by a small margin since we are in a long term relationship,” said Ireri.
The Central Bank Rate (CBR) has been going up since October 2011 as the regulator struggles to contain soaring inflation and stabilise the exchange rate.
But while some positive impact has been noted on the latter with the shilling appreciating by 16 percent within the last few weeks to Sh89.80, the downside has been that demand for credit has been suppressed.
Analysts have projected that the real estate sector particularly potential home buyers and development companies will be one of the casualties of reduced demand for credit given that interest rates have in the last two months gone up by nearly 15 percent.
Following Thursday’s hike, there is speculation that most commercial banks will also adjust their base rates which currently average 24 percent to reflect the new rate.
If these high interest rates are sustained, they could further strain the sector and possibly lead to a slowdown in the sector not to mention the effect on the economy.
But while acknowledging their industry is vulnerable to fluctuations in interest rates, Ireri sought to assure that the firm is seeking long term finance from external sources to fund its mortgage business and thus shield it from the volatilities.
“The firm plans to offer more fixed mortgage solutions for customers using the secured long term funds,” the MD disclosed.
In addition, he said Housing Finance plans to roll out current accounts to its customers in the first quarter of next year with the hope of reducing funding costs and increase the level of deposits available for mortgage lending.