The Kenya Mortgage Refinance Company (KMRC) has announced a significant adjustment to its loan eligibility criteria in an effort to ease the financial strain on middle-income earners aspiring to become homeowners.
Effective December 2023, individuals earning up to KES 200,000 per month are now eligible to apply for KMRC loans, a notable increase from the previous threshold of KES 150,000.
The decision to revise the income limit comes against the backdrop of rising living expenses, which have diminished the purchasing power of potential homebuyers across Kenya.
Chief Executive Officer of KMRC, Johnstone Oltetia, emphasized that the adjustment was a response to the prevailing economic challenges, particularly the adverse effects of inflation on consumers’ disposable incomes.
This initiative by KMRC marks a significant victory for the middle class, offering them access to affordable mortgage solutions at a time when traditional commercial banks are raising lending rates in response to adjustments made to the benchmark lending rate by the Central Bank of Kenya.
KMRC-backed loans, featuring an average interest rate of 9.5%, have played a crucial role in bridging the gap between escalating property prices and the financial capacities of potential homebuyers. Additionally, KMRC has revised its mortgage cap to KES 10.5 million to align with the increasing costs of housing and construction.
Funded by the World Bank and the African Development Bank through the Treasury, KMRC operates at a fixed interest rate of 4.5%, facilitating the onward lending of funds to participating mortgage lenders at a 5% interest rate.
This strategic financial model ensures that primary mortgage lenders, including banks and savings and credit cooperatives (saccos), offer mortgages to homebuyers at rates below 10.0%, with flexible repayment periods of up to 25 years.
Notably, standard mortgages offered by commercial banks currently carry interest rates of up to 21.0%, underscoring the significance of KMRC’s role in providing more accessible and affordable housing finance options to Kenyan citizens.
In 2023, KMRC disbursed mortgages totaling KES 2.4 billion, with an average loan size of KES 3.1 million. These funds were channeled through reputable financial institutions such as Stanbic Bank Kenya, NCBA Bank Kenya, and various reputable saccos, including Safaricom Sacco, Unaitas Sacco, Ukulima Sacco, and Stima Sacco.
The expansion of KMRC’s services and the adjustment of income thresholds represent pivotal steps in the government’s broader strategy to promote homeownership and address the housing deficit in Kenya.
By providing more affordable mortgages compared to traditional commercial banks, KMRC is playing a crucial role in transforming the aspiration of homeownership into reality for the burgeoning middle class.
In the face of economic challenges and rising living costs, KMRC’s dedication to facilitating access to affordable housing finance solutions underscores its pivotal contribution to driving inclusive economic growth and fostering social development across Kenya.
