Kenya: Cut Mortgage Rates, Kibaki Urges Banks

Nairobi — President Kibaki has asked mortgage lenders to reduce the cost of borrowing to enable more Kenyans to own homes.

"Many of our people still consider the option of mortgage financing as expensive, risky and a preserve of the rich," said the President.

"We must as a continent develop mechanisms that will make property financing affordable to the majority of our middle and low income population," he said.

The loan size

According to a survey conducted jointly by the Central and the World banks, money lending institutions charge an average interest rate of between 12.2 per cent and 14.1 per cent on mortgage. Many still consider this high.

The survey further indicated that the average mortgage loan size stood at Sh6.6 million last year up from Sh4.9 million in 2007. This was mainly attributed to amongst others, the expensive housing market.

Said the President; "Credit organisations must now rise up to the challenge and develop appropriate mortgage facilities to suit a larger portion of the population."

"In doing this, we must focus on the use of available local materials, which should be transformed through the use of modern technologies that make the construction of housing affordable.

President Kibaki said the government had introduced policy guidelines geared towards empowering commercial banks to extend more credit to real estate sector.

He said the Banking Act had been amended to enable mortgage finance companies operate current accounts, a measure intended to enable them mobilise additional deposits.

"Banks have also been allowed to advance up to 40 per cent of their total deposit liabilities up from 25 per cent for investment in land," he said.