Commercial banks have started to cut loan rates in view of the slashed base lending rate by the regulator in August.
The Central Bank of Kenya's (CBK) Monetary Policy Committee (MPC) cut its base rate to 12.75 per cent in August from 13 per cent.
Most Tier 1 banks have communicated the new rates to customers, with the Kenya Commercial Bank (KCB) charging the least average rates on personal loans amongst top banks according to the latest Commercial Banks Weighted Average Lending Rates report by CBK.
It is now charging a base of 15.6 per cent against Tier 1 average of 16.2 per cent.
This excludes margins after the country's banking sector adopted risk-based credit pricing where a borrower's rate is based on perceived risk.
Most lenders have capped the maximum margin at 8.5 per cent, meaning that the borrower perceived to be the most risky at KCB is currently charged 24.1 per cent.
Other top banks that are now charging below the Tier 1 average include Cooperative Bank and Diamond Trust Bank at 15.8 and 15.9 per cent respectively.
Others like Standard, Stanbic and I&M charge 17.3, 17.5 and 18.38 per cent.
NCBA and Absa are among the least affordable Tier 1 lenders in the country, charging 19.91 and 19.12 per cent respectively.
In a notice to borrowers, Equity Bank, the second largest lender in Kenya in terms of asset value indicated that it slashed its base-lending rate to 17.83 per cent from 18.24 per cent starting September 9.
"Consequently, the final interest rate shall be Equity Bank's reference rate (17.83) plus a margin currently at a maximum of 8.5 per cent. This will apply to all new Kenya shilling-denominated credit facilities,'' Equity Bank's notice reads.
Nine banks — KCB, Equity, Co-operative Bank, NCBA, Absa (Kenya), Standard Chartered Bank (Kenya), I&M, Diamond Trust Bank (DTB) and Stanbic Bank Kenya control more than 80 per cent of the industry’s total assets.
Overall, Premier and EcoBank are offering the lowest interest rates for personal short-term loans at nine and 11.06 per cent respectively, making them ideal for most borrowers in the country.
Analysts are expecting banking rates to slide more in the October review, following global trends, a relief to borrowers who have endured high rates since 2020.
"I project CBK to slash another 25 basis points in the October meeting considering that inflation is easing. It will probably have to look at what other regulators are doing globally,'' Clay Sidini of Monrovia Consulting told the Star on the phone.
At the September 2024 Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) lowered interest rates by 50 basis points, easing monetary policy for the first time in four years due to progress on the Fed's dual mandate. This lowered the interest rate target to a range of 4.75% to five percent.
Earlier on, the Bank of England had lowered interest rates to five per cent in the first reduction since March 2020.