Kenya Mortgage Refinance Company (KMRC) is reviewing its housing loans held by banks to enable middle-income groups to access mortgage loans.
The reviewing of housing loans is ongoing and was expected to be completed by the end of August 2019, when a report concerning the same will be submitted to KMRC.
“We have hired a consultant to conduct the review and we hope that by the end of the month, he will provide numbers and monetary value of all eligible accounts for planning purposes,” said KMRC chief executive officer Johnstone Oltetia.
The main function of the KMRC is to campaign the affordable housing project of the state by offering wholesale lending to primary mortgage loan lenders who will also in return lend to customers at more affordable rates.
According to KMRC, they will review the existing costs of mortgages, so lenders will then reduce the mortgage loans.
“We will refinance existing mortgages that meet the eligibility criteria, enabling primary lenders to revise charges downwards. The lenders must also provide collateral in the form of government securities, cash, or mortgages,” said Mr. Oltetia.
For mortgage lenders to be eligible for KMRC’s refinancing, they will have to show that they have lent loans of up to an upper limit of four million shillings to city customers and three million shillings for other areas to customers who earn less than 150,000 monthly.
Mr. Oltetia said that the repricing of the new mortgage loans will involve the borrower and the lender, but as much as KMRC will not dictate the final price a borrower is charged, they expect that it will still be below the market rates.
Among lenders that will be refinanced are KCB which holds about 21 percent shares, seven commercial banks, a microfinance institution, and 11 deposit-taking SACCOs.
The World Bank and the African Development Bank gave 25 billion shillings and 10 billion shillings towards the building of KMRC.
According to KMRC CEO, KMRC has already put in place lending policies and procedures which have already been published in the Kenyan Gazette.
Kenya’s Mortgage Landscape: A Transformation in Progress
The Kenya Mortgage Refinance Company (KMRC) is reshaping the mortgage market with a targeted review of housing loans. Their aim is to expand access to affordable mortgages for middle-income Kenyans—a move that could significantly impact aspiring homeowners.
The Review Process: What’s Happening?
KMRC is currently engaged in a comprehensive review of existing housing loans held by various banks. This thorough analysis is expected to conclude by the end of August 2019, after which a detailed report will be submitted to KMRC. The review is essential for understanding the current mortgage landscape and determining the best ways to support middle-income earners in their journey toward homeownership.
“We’ve hired a consultant to lead this review, and we’re confident that by the end of the month, we’ll have accurate data on all eligible accounts,” said KMRC CEO, Johnstone Oltetia. This data will be crucial for future mortgage planning and policy-making.
KMRC’s Mission: Making Housing Affordable
KMRC’s primary objective is to advance the government’s affordable housing initiative. They aim to achieve this by providing wholesale lending to primary mortgage lenders, who, in turn, are expected to offer more affordable loans to their customers. The strategy is straightforward: by reducing costs for lenders, the savings can be passed on to borrowers, making home loans more accessible.
The Plan: Lowering Mortgage Costs
One of KMRC’s key strategies involves a meticulous review of current mortgage costs. The goal is to refinance existing mortgages that meet specific eligibility criteria. Once refinanced, primary lenders will be encouraged to lower their charges, thereby making mortgages more affordable for the average Kenyan. However, lenders are required to provide collateral, which could be in the form of government securities, cash, or mortgages.
“We’ll be refinancing mortgages that align with our eligibility guidelines, which should enable lenders to adjust their rates downward,” explained Oltetia. “While we won’t dictate the final price that borrowers pay, we expect these new loans will be priced below current market rates.”
Eligibility Criteria: Who Can Benefit?
To qualify for KMRC’s refinancing program, mortgage lenders must demonstrate that they’ve issued loans up to a maximum of four million shillings for urban customers and three million shillings for those in other areas. Additionally, these loans should be targeted at individuals earning less than 150,000 shillings per month.
The repricing of these new loans will involve collaboration between the borrower and the lender. Although KMRC won’t directly control the interest rates, the expectation is that they will be significantly more affordable than current market offerings.
Who’s Involved? The Key Players
Several major players are involved in this refinancing initiative. Leading the charge is KCB, which currently holds about 21 percent of the market share. Besides KCB, seven other commercial banks, a microfinance institution, and 11 deposit-taking SACCOs are set to benefit from KMRC’s refinancing efforts.
Funding the Initiative: The Role of International Banks
This ambitious program is backed by substantial financial support from major international institutions. The World Bank has contributed 25 billion shillings, while the African Development Bank has provided an additional 10 billion shillings. This financial backing is critical for KMRC’s ability to offer refinancing at lower rates and reduce mortgage costs across the board.
Looking Ahead: The Impact on Kenya’s Housing Market
As KMRC’s review concludes and refinancing begins, the impact on Kenya’s housing market could be transformative. By making mortgages more affordable, KMRC is not only helping individuals achieve their homeownership dreams but also supporting broader economic stability and growth. With clear policies and procedures already published in the Kenyan Gazette, the stage is set for a new era in affordable housing.
In conclusion, KMRC’s efforts are poised to revolutionize Kenya’s mortgage market, creating new opportunities for middle-income earners to secure affordable homes. As this initiative unfolds, it will be interesting to observe how it reshapes the housing landscape and contributes to the government’s vision for affordable housing.
