Borrowers face higher cost of loans
Loans and mortgages for Kenyans will be more costlier from January, when commercial banks for the second time adjust their reference rates to reflect the new Central Bank of Kenya (CBK) base lending rate.
Already, NCBA Bank has issued a circular to its customers, informing them that from January 6, 2023, the lender’s USD and local currency base lending rates will increase by 1 per cent per annum. More lenders are expected to jump on the bandwagon in the new year.
“Dear Customer, this is to notify you of a change in our KES and USD Base lending rates from 10 per cent to 11 per cent per annum and 9 per cent to 10 per cent per annum respectively, effective 6th January 2023,” the circular noted.
Rising inflation
In the latest adjustment, CBK’s Monetary Policy Committee (MPC) for the second time since May raised its benchmark rate to 8.75 per cent to hedge the economy’s exposure against rising inflation and global risks.
The rates were first adjusted at the end of November 2022, when CBK first raised its benchmark rate to 8.25 per cent with several lenders includ-ing NCBK adjusting their interest by up to 1.1 per cent.
As at September 2022, Kenya’s bank lending rate was 12.410 per cent per annum, recording an increase from the previous number of 12.380 per cent per annum for August. The data, which is updated monthly, av-erages 16.360 per cent per annum from July 1991 to September 2022.
The costlier credit is expected to impact household borrowing to facilitate payment of school fees and mortgage, at a time the economy is witness-ing increased demand for loans amid the recovery from Covid-19 eco-nomic hardships, putting more pressure on lending rates.
In November, the Government scrapped school fees subsidy for second-ary schools, meaning parents with children in national schools will either dig deeper into their personal savings, or seek solace in bank loans to pay Sh53,554 for their kids in National and extra-county boarding schools, up from Sh45,054 while those with kids in sub-county boarding schools will pay Sh40,054 up from Sh35,000.
