The mortgage system in Kenya boasts of affording many families their own homes. However, with most Kenyans current disposable income, it is clear that not many can afford a decent house through this system, writes ALLAN OLINGO
When The Mortgage Company in partnership with HassConsult announced the results of the second quarter mortgage report a fortnight ago, it revealed a trend of falling interest rates for mortgages, despite the long running peak in the base rate of 18 per cent.
“The mortgage rates have been trending downwards, as the industry becomes more creative and more focused in making home ownership products accessible,” said Caroline Kariuki, Managing Director of The Mortgage Company.
Financial institutions have now come up with new products that are meant to entice the market. Standard Chartered Bank has a mortgage takeover offer at 16.9 per cent, non-bank mortgages at 14 per cent, and CFC Stanbic on the other hand, has a new fixed rate offer at 18.5 per cent. Other new players like the micro-finance institutions have also made debuts into the mortgage bandwagon with Rafiki DTM having launched incremental housing mortgages of between Sh300,000 and Sh3million that targets the middle to lower end of the market.
As much as this is good news, the mortgage rates remains high and out of reach to most Kenyans. With various gross salaries and generic pay slips, below are key scenarios that many would-be homeowners fall into and the kind of properties that their current earnings can earn them through the mortgage system or basic options that they can explore.
Moses Kivuva is an employee of a non-governmental group called The Movement.
His gross income is Sh100,000. After he pays his deductions that include the Paye, a loan with a co-operative organisation and his monthly shares, his net salary come to Sh65,747.60.
Moses lives in a one bed-roomed house in Lang’ata, which he pays Sh20, 000 as his rent and his other utilities totals Sh15,000. With this his disposable income becomes Sh30, 747.60.
Assuming we split his disposable income by half, he will then be comfortable servicing a mortgage with monthly premiums of Sh15,000.
Now it will be a tall order for him to have a mortgage with such kind or repayment system but there are other options he could consider.
Viable option: Moses can take up a mortgage savings plan in which he will save 15 per cent of his salary for a period of 60 months in order to raise a deposit for Sh6 million house say in Nyayo Embakasi or Kitengela.