Barclays Bank of Kenya has announced that it will cut its base lending rate by 1.5% percentage points to 19.5% effective 1st October 2012. This comes a week after the Central Bank of Kenya‘s Monetary Policy Committee cut its lending rate by 3.5% percentage points to 13% down from 16.5%. Barclays has joined CFC Stanbic Bank and KCB Bank who cut their rates earlier this week by 3.5 and 3 percentage points respectively to have their base lending rates stand at 19%.
Other banks who have announced reduction in their base lending rates are Ecobank who have cut their rates to 21.5% down from 25%. Ecobank’s new rate come into effect on the 15th of October. Victoria Commercial Bank has also announced that it would lower it base rates effective 1st of October to 20.5%.
Mortgage rates
Earlier in the week, KCB Bank Group’s mortgage division S&L announced a reduction in its rates on mortgage loans to 18% down from 19% effective 1st of October. The bank also announced that its KCB Mortgage Advantage customers will now service their mortgages at 16.5% down from 17.5%. In the same line, mortgage provider Housing Finance has stated that it will lower mortgage rates by 5 percentage points to 18% down from 23%.
During the MPC meeting, Central Bank Governor Njuguna Ndung’u expressed concerns that commercial banks were not transferring the overall effect of low base rates to borrowers.
“The Committee noted that interest rate spreads remained high suggesting that these cost reductions had yet to be fully transferred to bank customers and the economy at large through declining cost of credit,” Ndung’u noted.
With the low base lending rate, commercial banks are expected to lower their rates to give borrowers affordable loans. Interest rates on loans sky rocketed to an average of 25% in October 2011 up from an average of 15% a year earlier making borrowers shun taking new loans.