BANKS TO LOWER LENDING RATES STARTING MONDAY

Investors can rest this weekend with held breath as they await lower interest rates starting coming Monday with most banks having announced lending rates will fall below 20%. Already several banks have indicated that they will be reduce rates among them KCB, Co-operative bank and CFC. On September 5th the central bank cut its base rate by 350 basis points to 13% from 16.5% when it again cut the CBR by 150 basis points. As a result of the second cut a number of banks moved in quick to announce that they would be reducing their base lending rates. CFC announced that it would reduce its lending rate to 19.5%, while Kenya commercial bank announced it would reduce it to 19% from 22%. Standard chartered also announced that it would lower its lending rate from 21.5% to 18.5% one of the most competitive rates in the market. However other banks that have lowered their rates will not take effect until mid October including CFC bank, commercial bank of Africa and diamond trust bank which lowered by 3.5% to 19%. Customers of Barclays bank which has lowered its rate by 1.5% to 19.5% and Housing finance to 18% will also have to wait till 15th October to enjoy the cut. Ecobank which has cut its rate by 3.5% however remains above the 20% mark with its lending rate at 21.5%. Several banks have however yet to cut their rates. Mortgage has however seen a more significant drop following the cut with Stanchart offering the takeover offer interest for a mortgage at 16.9%, while KCB has reduced its mortgage rates to 18%. In the same category I&M bank has fixed its floating rate for new mortgages at 18%. With this statistics the building and construction sector can be said to stand out as among the sectors expected to be the biggest beneficiaries after suffering heavily following the increment with growth having dropped from double digit in 2011 to just above 5% in 2012 as mortgage and the cost of capital simply spiraled out of control. Expansion by the private sector is also expected to take root after months of stagnation with launch of new products also expected to manifest the effect of cheaper credit. With a number of banks yet to reduce their rates however it is expected that they will face new pressure from especially borrowers and the central bank which has expressed it will to have the economy back to a higher growth trajectory. In August a bid by Gem MP Jakoyo Midiwo to have interest rates offered by banks stipulated by the CBR met resistance in parliament before been defeated among accusations of bribery by the financial institutions.