According to a mortgage report released last week by HassConsult and The Mortgage Company (TMC), interest rates offered by the country’s top mortgage financiers currently range from 19 to 28 per cent – figures that are very unattractive for new mortgages.
“Potential home buyers have kept off mortgage loans, afraid of the negative equity in the long term,” said Caroline Kariuki, the chief executive of TMC.
Ms Kariuki, who is a former divisional director of KCB Mortgages, said the high rates have impacted heavily in the short term on both the supply of new homes and the mortgage uptake.
Commercial banks hiked their interest rates late last year after the Central Bank of Kenya raised its benchmark lending rate to 18 per cent as part of measures to tame the run-away inflation.
According to the Star Newspaper, I&M Bank has the lowest mortgage rate in the market for new loans at 19 per cent, while Bank of Africa currently has the most expensive rate at 28 per cent for direct home purchase, equity release and land purchase.
Property analysts say the high interest rates have had a major impact on home developers who are now faced with an increasingly indecisive flock of potential buyers.
“Most middle income housing developers rely on construction finance they can’t access this now – this segment will most likely suffer,” said Farhana Hassanali, the property development manager at HassConsult.
Potential home buyers have now resorted to renting or moving down the property ladder by buying homes they consider affordable – with most shying away from mortgage loans.
Prior to the rates hike, the uptake of mortgage had grown to 20,000 accounts in 2011 from 16,000 a year earlier.