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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

An independent mortgage brokerage firm has entered Kenya’s mortgage market with a view to deepening property ownership and mortgage uptake in the country. The Mortgage Company (TMC Africa), the first mortgage broker in East Africa, hopes to revolutionise the home ownership value chain and hopes to rope-in informal income earners to take up mortgages. The firm will provide all-round services to potential mortgages – individuals and businesses – while shopping for the best financing options available in the market. By acting as an intermediary, the mortgage broker will be better placed to negotiate for tailored products with financiers for home purchase or construction loans.

Its position gives it an edge to keep tabs on developments in the real estate market and capacity to provided mortgage information. Traditionally, banks and other lenders sell their own products but presence of brokers is likely to see them introduce competitively priced mortgage packages.
“Our role as a mortgage brokerage is to complement financiers at all levels. We aim to simplify the experience of home ownership by negotiating with financiers on behalf of the client,” Caroline Kariuki, TMC Africa’s managing director, told The Star in an interview. “Our loyalty lies with the customer and we are committed to ensure they get the best and most straightforward deal when acquiring property,” said Kariuki, who is the immediate former divisional director of mortgages at KCB S&L Mortgages. She has over 18 years experience in the mortgage sector.

The mortgage broker will find direct lenders on behalf of clients for specific mortgage loans at a fee while saving the client money and time taken to close deals. It will work closely with credit reference bureaus in carrying out debt scoring to establish the credit risk of borrowers, while advising on appropriate mortgage product. It will negotiate with financiers and handle structuring of deals. “Usually, the draw-down time for most projects is about two years from the time a client begins negotiations with financiers but we can cut this to about three months,” said Kariuki. She said the firm will partner with lenders to develop new mortgage products that suit different kinds of customers in the market. “We aim to exploit the life-time value of the customer – from right out of college to retirement. We’ll be offering more than just mortgage options. We’ll assess customer needs and advice accordingly.

“As an independent player, I can see the existing gaps and the pains customers go through. For instance, we need products for informal incomes and for SMEs. Also, most people may not know that they can take up joint-ownership mortgages. At some point, we may need to have reverse mortgages, foreign-denominated loans and refinancing options for individuals and companies,” said Kariuki. Kariuki said in the next stage, the firm will venture into mezzanine financing by providing a hybrid of debt and equity financing to developers wishing to expand their property investments. Equity financing could see it partner with insurers and pension funds, with the potential of reaping lucrative returns of well over 35 per cent of investment value. TMC has been in the market for four months and has already handled transactions worth over Sh1 billion for about 10 corporate clients. It’s currently targeting developers, high net-worth individuals and groups. It charges one per cent the value of the mortgage for its services, which can be as little as Sh50,000 according to Kariuki.

The firm aims to enlist at least one million mortgage accounts in the next five years. Kenya’s mortgage market is still small with a mortgage debt of 2.5 per cent to the GDP, distributed in about 16,000 outstanding mortgage accounts in 2010. “We wish to see more people choosing to invest in property than rent, and this will not affect the rental market,” said Kariuki. TMC will pay closer attention to the retail market (individuals) and will be holding mortgage clinics every weekend to tap the numbers. “Unless you give someone a key to unlock their potential, then you are not serving the needs of the market – that’s where the rubber meets the road for us!” she said. In developed mortgage markets like the UK, Canada and the US, mortgage brokers are the largest sellers of mortgage products for lenders.

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Did you know

Buy-to-let gains recovering as

mortgage prices fall

  • Mortgage rates have dropped sharply in the last two months
  • The best mainstream mortgage offer is now Barclays at 15.5 per cent
  • The highest mainstream mortgage offers are now from National Bank and Chase Bank at 22 per cent
  • The comprehensive cuts have seen the average mortgage rate move to 19 per cent, from 22.5 per cent in the second
  • Foreign currency mortgages are being made available at much lower rates still, from 9 to 10.25 per cent, but carry
    heavy exchange rate risk
  • The third quarter brought a sharp recovery in the combined returns from rents and house price rises for buy-to-lets, to
    13.12 per cent in September, up from 6.81 per cent in June 2012

Mortgage rates declined, in some cases by as much as 6 percentile points, in the third quarter of 2012, reported The
Mortgage Company in its quarterly mortgage report.
At the same time, the returns from buy-to-lets jumped sharply, significantly narrowing the gap between returns and
borrowing costs.
The biggest rate cuts since June came from Barclays, which cut its mortgage rate by 6.4 percentile points, to offer the
currently lowest mortgage rate in the mainstream market, at 15.5 per cent.
Other notable cuts came from HFCK, which cut its rates by 5 percentile points to 18 per cent, and Equity Bank, which cut
its rate by 3 points to 21 per cent.
However, many mainstream banks were slow to follow, finally announcing cuts this week. This latest realignment has
moved the average mortgage rate to 19 per cent, and sees National Bank and Chase Bank topping the league for the
country's most expensive mainstream mortgages, at an annual interest rate of 22 per cent.
“Some mortgage takers are really suffering through holding mortgages with some of the country's most expensive
suppliers - in some cases now paying several hundred thousand shillings in extra interest payments a year,” said Ms Carol
Kariuki, the MD of The Mortgage Company (TMC).
“This, alone, brings home the need for full information flows on the different mortgage rates available in the market, so
that consumers can choose genuinely competitive mortgage offers,” she said.
TMC also published its first league table on the foreign currency mortgage rates available in Kenya from I&M Bank, CFC
Stanbic, CBA, Equity Bank and Bank of Africa.
“With interest rates on these mortgages running at between 9 and 10.25 per cent, these mortgages are currently far
cheaper than shilling-denominated mortgages, but mortgage takers need to take great care with foreign currency
mortgages, where repayments are in dollars, pounds or Euros. When the exchange rate moves against them, it can leave
them carrying huge extra burdens in buying the foreign currency for their mortgage repayments,” said Ms Kariuki.
For mortgage financed landlords, who for the last decade, were earning more from rent and house price appreciation
than they were paying in mortgage interest, the last year brought a marked dip into negative returns.
However, the gap between gains on buy-to-let houses and pay-outs on mortgage interest narrowed sharply in the third
quarter, with buy-to-let returns climbing to reach 13.81 per cent by September, from 6.81 per cent in June.

Total returns on mortgaged house purchases

A comparison of the costs of a variable mortgage, versus the gains in house price appreciation and rental
income in each year.

How recent rate cuts are leading to

big savings on repayments

Scenario: A Kshs. 10m mortgage (20% deposit) over 20 years based on the
best rate available at that time.


A 3.5% rate cut from April 2012 to October 2012 led to a 16.5% reduction in monthly repayments.
A 2.1% rate cut from April 2012 to July 2012 led to a 11% reduction in monthly repayments.
A 1.4% rate cut from July 2012 to October 2012 led to a 6% reduction in monthly repayments.

Preferential Rate Mortgages

Did you know that high net worth individuals and preferential clients can sometimes get better rates?

Mortgages available to the diaspora

At a glance, banks best rates for foreign currency mortgages available to those earning an income in
US Dollars, GB Pounds or Euros including but not limited to the diaspora.

How Kenyan property yielded better returns for the diaspora

over the last ten years

Scenario: Buying a Kshs. 10m home in Kenya with a 20% deposit and a 9%* interest rate over a 10 year period yielded
a return of Kshs. 18.9m while buying a home in the US with a 20% deposit and a 3%* interest rate over a 10 year period yielded
a return of Kshs. 3.7m. This is because property in Kenya over the last ten years has appreciated on average 331%
versus 50% for US properties. *Return is calculated by subtracting total cost of home from value of property at period end

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