The banking sector has realized tremendous growth since the early 80s, with different financiers playing an active role in long term credit advancement through mortgages. However the middle class has been largely marginalised from the property finance sector of this growth. Infact lower tier financiers such as SACCOs and CHAMAs appear to be doing far better than the formal banking sector in this area. We aim to look into that in a subsequent article.In this article we present a ranking of mortgage interest rates charged by a sample of 10 of Kenya`s mainstream commercial banks in April 2016 on house purchase and commercial construction mortgages.
The lowest mortgage in the market was from Standard Chartered Commercial Bank at rates ranging between 14.9% to 17.9% based on the risk profile of the individual/SME and bundle of choice where the interest rate would be lower if the client opted to take up the facility together with a credit card and without, the facility would attract a higher rate. The financier offers a maximum repayment period of up to 25 years on its mortgage facilities.
Coming in second place was Barclays Bank of Kenya whose rates are between 14.9% to 18%; almost similar to Standard Chartered Bank. Both banks are head-quartered in the United Kingdom and may be offering this competitive pricing to claw back market share lost in recent years to several upcoming more locally owned/branded banks. Barclays’s Bank credit scoring criteria is similar to Standard-Chartered Bank. (BBK has been at pains to counter this “rumour”)
Kenya Commercial Bank features at position three with its mortgage subsidiary S&L offering interest rates of between 15.9% and 20%. The government owned financier is very stable and recently acquired the ailing Chase Bank which went into statutory receivership, reportedly from insider over-lending.
CFC Stanbic Bank claimed the fourth spot with rates ranging between 15.5% and a ceiling interest rate of 18.5%.The financier’s mortgage facilities are available to salaried, self-employed, resident and non-resident individuals displaying flexibility in accommodating majority of the market .Furthermore, in a bid to attract and retain a niche market, they promise a turn-around time of 4 days having been furnished with complete and satisfactory documentation.
In fifth place is I &M Bank with rates of between 16.5% to 19%. These rates are still subject to the stipulated norms of credit scoring and Central Bank of Kenya prudential guidelines. The bank recently acquired Dubai Bank and Giro Bank hence a significant growth in its client base.
The financier offers free fire insurance cover on the mortgaged property during the first year of facility amortization.
Position six went to National Bank of Kenya with interest rates of between 16.9% -20% which is reasonable considering the financier recently rebranded and is still under statutory receivership despite being government owned. The Kenyan Government has assured depositors that their monies are still safe with the financier. To affirm this, the financier is currently offering mortgages of up to a maximum of Kshs 250 M while most commercial banks have a thresh-hold of Kshs 100 M maximum being offered to a single borrower.
National Industrial Commercial (NIC) Bank scoops position seven with interest rates of between 17.9% to 20.5% on mortgage facilities. The financier does not levy any penalty fees on early loan repayment and offers comprehensive insurance cover during repayments which also caters to the mortgagor, facility recipient in the event of retrenchment, death and disability. However, the financier is more dominant in the asset financing business.
At position eight is Equity Bank with an offer of between 19% to 21%. The bank gives a maximum mortgage loan repayment period of 15 years on both residential and commercial properties which is quite short in comparison to the competition. However, the financier is more vocal in small and medium size businesses’ working capital financing which has propelled it to the top spot in terms of revenue growth and stability.
Co-Operative Bank of Kenya takes home position nine as the lender`s rates oscillate between 19.25% and 21%. The financier offers a maximum loan repayment of up to 25 years on mortgage advancements. The facility is open to both resident and non-resident clients. Co-Operative Bank is renowned for its support to SMEs and the SACCO movement which has been a key driver to its long term growth as a financier. It features among the top commercial banks in Kenya in terms of profitability according to the Central Bank of Kenya who is the industry regulator in Kenya.
At position 10 and somewhat counter popular perception, considering the institution has been a mortgage power-house since inception is Housing Finance, former HFCK with an offer of between 20% and 21%.One of the highest in the market. However on the sunny side, the bank offers up to 115% financing (stamp duty, valuation, legal fees) and down-payment where required will be covered which is an advantage to individuals and corporates who opt for an entire loan financed position on capital expenditure.
The foregoing information is intended as a guide to the current mortgage market in Kenya and a reminder of the value in shopping around before settling on a particular facility.
As players in the real estate sector, we look forward to a time when mortgages and construction financing will be accessible to more Kenyans.
-Literature review and telephone interviews with various bank Credit Officers and Relationship Managers.
-Kenya National Bureau of Statistics; Economic Survey 2016
The interest rates in this article are based on information from the sources listed above which were in the public domain during the month of April 2016. The ranking given is for the sample of 10 banks chosen, and is not intended to be a representation of the entire banking sector in Kenya.
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