Housing Finance expects rates to fall in Q3

An expected easing in Kenyan interest rates from the second half of 2012 could give relief to house buyers struggling with last year's sharp jump in rates, the CEO of specialist mortgage lender Housing Finance said on Wednesday.

Commercial lending rates leapt to about 25 percent late 2011, from 15 percent, after the central bank raised its policy rate by more than 11 percentage points to fight inflation and a slump in the currency.

"With the high interest rates, demand is still there but affordability becomes an issue. We have seen people slowing down, holding onto offer letters," Frank Ireri said late on Tuesday.

"It is quite serious. If somebody had been offered a rate of 15 percent and now they are told it is at 23 or 25 percent, that is an issue."

Kenya's central bank kept its interest rate on hold at 18 percent early March, citing potential risks to the economy such as inflationary pressures, which have yet to respond dramatically to monetary tightening.

Speaking to Reuters at the launch of the firm's current account product, Ireri said he expected lending rates to start falling at the start of the third quarter.

Analysts expect the central bank to start monetary easing soon to take some pressure off east Africa's largest economy.

Housing Finance expects to post growth in profit this year despite the slowdown, thanks to its diversified sources of funds, including a medium-term corporate bond that shields it from sharp jumps in costs of funding.

The company is Kenya's sole specialist mortgage lender, commanding 31 percent of the total 17,000 mortgage accounts, with the rest being shared out among various commercial banks.

The east African nation of 40 million people has a massive housing deficit with annual demand at 250,000 units per year against a supply of 60,000 units.

-Reuters