After the Central Banks move to lower base lending rates last week, commercial banks have started lowering their rates in a move that would see borrowers access cheaper loans in the near future. CFC Stanbic Bank has announced that it will be lowering its lending rates to 19% down from 22.5%, effective from the 15th of October. This move comes barely a month after the bank lowered its rate to 22.5% from 24% following Central Bank’s reduction of the rate in July this year. More commercial banks are expected to follow CFC’s move to lower their rates by the same margin.
The Central Bank of Kenya‘s Monetary Policy Committee last week lowered the base lending rate (Central Bank Rate) by 3.5% percentage points to 13% down from 16.5% in July this year. CBK attributed the need to lower the rate to the falling trends in inflation. The overall inflation declined from 10.05% in June to 7.74% in July and further to 6.09% in August. The decline in the overall inflation,CBK says, was supported by a continued reduction in food and fuel prices as well as easing demand pressures in the economy.
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.
The average lending rate by commercial banks currently stands at 22% with the rate expected to fall beyond the 20% mark before the end of the year following Central Bank’s reduction of the base lending rate.