Something interesting is taking place in France, which local lenders should take note of. Over the last one year, the number of people, including foreigners, investing in French property has increased rapidly, thanks to falling mortgage rates.
According to the latest edition of French Property News magazine, brokers are reporting that property demand rose sharply last year and has held firm until now. Official figures, says the magazine, show that property transactions last year were at the highest level since 2012, and 12.5 per cent higher than a year earlier.
Fixed-rate mortgages, the most popular in France - they protect borrowers should interest rates rise as they never change throughout the life of the mortgage - are currently available at very competitive rates: a 20-year fixed rate can be obtained from 2.7 per cent, with even lower rates available if you open a savings account with the lender.
This is in sharp contrast to the situation back home where the Central Bank of Kenya’s (CBK) indicative rate, commonly known as base lending rate, is still at 11.5 per cent.
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The average lending rates by commercial banks, according to the CBK, declined to 17.9 per cent in February, from 18.3 per cent in December 2015. As reported in this space last week, the regulator wants banks to reduce their operating costs and enhance transparency in the pricing of credit as a first step to bringing down lending rates.
True, Kenya’s and France’s monetary and economic situations are worlds apart. But there is no good reason why our lending rates should continue being too high. The lesson local financiers should learn from what is happening in France is that when you make borrowing cheaper, you make real estate a mass market where just about anybody with an income can own a home through a mortgage.
