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The Mortgage Company,
The Greenhouse, 2nd Floor
Adams Arcade, Ngong Road
P.O. Box 29310-00100, Nairobi

Tel: +254 729 933955, +254 737 933955

Speech by Caroline Kariuki,Managing director of Mortgage Company on mortgage report in kenya

Caroline Kariuki, Managing Director,
The Mortgage Company

Thank you, Farhana, Ladies, Gentlemen, and members of the press, for your time and interest today in this second mortgage industry report. There can be few industries quite as relieved as the mortgage industry by last week's news of a final easing in the CBK base rate.

For those of us in the industry, we see home loans as an entry point to asset ownership that is more than a life-time repositioning. Homes, once fully owned, pass on to future generations, representing a permanent change in a family's wealth and costs. However, a mortgage is a long journey, and it is vital that every buyer who signs up for a home loan is positioned to achieve the best possible value and the best possible returns.

Mortgage buyers often pay substantially more month by month than renters, but even at the recent interest rate peaks, normally end up millions of shillings ahead of their renting counterparts. That gain is now set to increase sharply, in an environment of rising rents, and falling interest rates.

That said, for many landlords already locked in at lower rental incomes, and after more than two years of only negligible gains in house prices, the last three quarters have brought lower returns in rent and capital appreciation than the cost of mortgage finance. But we now see that this has been almost an isolated case of such net losses across the previous decade. With rates now falling, rents rising, and house prices set to rise, we forecast a progressive closing in this gap from here, and a return to positive gains for landlords too.

At the same time, for new entrants into the housing market, the last quarter has seen a downwards trend in mortgage costs, with StanChart moving to offer a rate of 16.9 per cent on mortgage takeovers with established credit history, CFC Stanbic cutting its fixed rate to 18.5 per cent, and the volume of non-bank mortgages expanding, at rates of around 14 per cent. Microfinance institutions are also now moving into home loans, although principally for land plots.

We have additionally presented the rates for the leading mortgage lenders, with a spread at the end of June between the most expensive mortgages, from Equity Bank and CFC Stanbic at 24 per cent, to the cheapest, from I&M Bank at 18 per cent, of a full
6 percentile points. In financial terms, the cheapest of these mortgages demands 24 per cent less in payments than the most expensive. This is important.

We have also calculated this time the payments needed to save a deposit and access a mortgage for properties from land plots to stand alone houses. On this basis, we calculate, for example, that saving Sh17,200 a month for five years is enough to access a Sh6m first home.

As it is, Kenya remains a property market where the majority of purchasing is done in cash by buyers wealthy enough to be able to hand over the asking price in one payment.

But, globally, home ownership has become the norm thanks most substantially to the mortgage industry, which enables salary earners to access homes, covering the rental and additionally accumulating an asset that moves into the family for generations. Worldwide, mortgages have served to transform the working classes into classes with assets and wealth. For mortgage brokers such as ourselves, we are always searching for the best mortgage deal for every buyer, and passionately believe in the long- term repositioning of individual families that our industry delivers.

But with every purchase there is the opportunity to get the very best deal available, and the risk of paying far more, and we do believe it is vital to familiarize every potential buyer with the terms on offer, and the returns each and every deal represents for them in the long term.

On which note, we should like to open for your questions, and take the chance, once again, to thank you all for your time and interest in joining us today.

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Did you know

Does a pre-approval letter mean I have a Mortgage?

What the experts say

False,  a pre-approval letter is very helpful, but not as biding as you might think. Once you find a home you'd like to buy, and your bid has been approved, you will have to go back to the lender and submit documents that corroborate your financial information to get a loan.

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