Banks raise interest rates on loans to more than 20 percent
3 min read
Banks inform clients of an increase in loan interest rates, a move that will see customers pay more than 20 percent
Banks inform clients of an increase in loan interest rates, a move that will see customers pay more than 20 percent.
Due to the hike in the benchmark lending rate set by the central bank, Kenyan banks have raised interest rates on customer loans in the most recent pricing cycle, which would result in customers who are considered to be the riskiest paying more than 20 percent.
Lenders have been alerting their clients about upcoming alterations that may impact both new and current loan facilities during the past week.
The new rates are being implemented across July and August.
Banks charge a spread of approximately 6% on top of the base loan rate, which translates to the fact that certain consumers will pay more than 18% after the review depending on their risk profile.
Stanbic Bank Kenya, for example, will start charging 18.57 percent on its mobile loans from August 21 having lifted its base lending rate to 13.15 percent from 12.58 percent.
For its part, Equity Group lifted its base lending rate from 12.5 percent to 14.69 percent on July 10, sending interest rates levied on customers with a higher risk profile to as high as 20.19 percent based on spreads from its risk-based pricing model.
Absa Bank Kenya is set to adjust its base lending rate by one percent from this week while the lowest interest rate charged on loans at NCBA moves up to 13 percent from 12 percent.
National Cybercrimes Committee announces massive attacks on government’s critical services
Banks to be granted access to secret State database to monitor transactions
Sudan hackers targeting Kenyan Government sites amid the escalation of animosity
“In view of the recent increase in the Central Bank of Kenya (CBK) rate, we wish to advise that we will adjust our Kenya shilling base lending rate to 13 percent per annum effective August 7,” NCBA told its customers in early July.
The loan repricing cycle was set off on June 26 when the CBK tightened its monetary policy with the view of firming down inflation expectations.
According to analysts, interest rates on bank loans are set to climb further as most banks implement their risk-based pricing models.
CBK had earlier disclosed it had approved the new pricing regime for 33 of Kenya’s 38 banks.
Interest rates on bank loans are expected to move further away from the Central Bank Rate at the full implementation of risk-based pricing.
The benchmark rate has influenced the pricing of bank loans, drawing from the legacy of the interest rate control regime when lenders were allowed to add a maximum margin of four percent on the CBR.
Also read,
Manufactures slap a 9 percent price increase on goods over additional taxes
Government breaks silence after Sudan hackers attack crucial state websites
Raila sets condition for him to hold talks with Ruto
Follow us
