How to Fix High Mortgage Interest Rates in Kenya and Nigeria

What is a Mortgage Interest Rate?

A mortgage interest rate is the extra money the bank charges you for borrowing a home loan. It is a percentage added to your loan every year. For example:

• If you borrow ₦10 million or KSh10 million

• And the bank charges 15% interest per year

• You will pay ₦1.5 million or KSh1.5 million extra every year

This means the higher the interest, the more expensive your home becomes.

Why Are Mortgage Rates So High in Kenya and Nigeria?

There are many reasons, and understanding them helps you know what to fix.

.1 High Central Bank Rates

Central banks in Kenya (CBK) and Nigeria (CBN) set interest rates. When these are high, commercial banks also raise rates. It affects mortgage costs directly.

.2 Inflation

Inflation means prices keep going up. To fight inflation, central banks raise rates. But this also makes loans more expensive for buyers.

.3 Bank Risk and Cost of Lending

Banks worry that people may not repay their loans. To protect themselves, they increase interest rates. Also, the cost of borrowing money is high for banks in these countries.

.4 Poor Credit Systems

In developed countries, credit scores help banks trust borrowers. In Kenya and Nigeria, credit rating systems are weak. So banks increase rates to reduce risk.

.5 Lack of Competition

Not many banks give home loans. This means there’s less competition, so banks don’t need to lower their rates.

.6 Currency Weakness

If the currency loses value (like Naira or Kenyan Shilling), banks raise interest to protect their profits.

How High Interest Rates Affect Home Buyers

.1 You Pay Much More Over Time

If your mortgage interest is 20%, you might pay double the price of your house by the end of the loan.

Example:

.2 Monthly Payments Are Too High

Even if you qualify for a mortgage, the monthly payments might be too much. Many give up before finishing.

.3 It Affects Your Savings

High mortgage payments leave little room for savings, school fees, or emergencies.

.4 People Stop Trusting Mortgages

Many people think buying a home through mortgage is a scam because they pay too much in interest. This fear keeps people from using the system.

How to Fix High Mortgage Interest Rates (Step-by-Step Guide)

There is no magic button, but there are smart ways to reduce the rates you pay.

.1 Improve Your Creditworthiness

Banks reward people they trust. Here’s how to become more trustworthy:

• Pay your bills and loans on time

• Reduce your debts

• Avoid bouncing cheques

• Get a credit report and fix errors

In Kenya, use CRB reports. In Nigeria, use credit bureau records.

.2 Choose Shorter Loan Terms

A 10-year mortgage has lower interest than a 20-year loan.

Why?
The bank takes less risk in short loans, so they charge less interest.

.3 Make a Bigger Down Payment

The more you pay upfront, the less you borrow. That means less interest over time.

Example:

• Home price: ₦10 million

• Down payment: ₦2 million (20%)

• You borrow ₦8 million instead of ₦10 million

• You save a lot in long-term interest

.4 Compare Banks Before Choosing One

Some banks offer better rates or friendlier terms. Don’t just go to the first bank you know.

Ask these questions:

• What is your interest rate?

• Is it fixed or variable?

• What fees do I pay?

• Can I pay early without penalties?

.5 Use Cooperative Societies or SACCOs

These groups often offer lower interest rates than banks. Especially in:

• Kenya: SACCOs like Mwalimu National SACCO

• Nigeria: Cooperative societies registered with your employer

They are slower, but cheaper and friendlier.

.6 Take Advantage of Government Housing Schemes

Governments in both countries offer special programs for first-time buyers. These include:

• Lower interest rates

• Longer payment periods

• Help with documentation

(Full list of programs in section 5.)

.7 Refinance Your Mortgage

This means taking a new loan to pay off the expensive old loan—at a lower rate. More on this in section 7.

.8 Negotiate Directly With Your Bank

Don’t be shy. Ask your bank to reduce your rate, especially if:

• You’ve been a good customer

• You have a good credit record

• You found better offers elsewhere

Government Programs That Can Help

.1 Kenya: Affordable Housing Programme (AHP)

• Interest rates around 7%

• Long payment plans (up to 25 years)

• For low- and middle-income earners

• Managed by Boma Yangu and KMRC

Website: bomayangu.go.ke

.2 Kenya: Kenya Mortgage Refinance Company (KMRC)

• Partners with banks and SACCOs

• Offers cheaper funding so they can lend at lower rates

• Rates as low as 9.5% (as of latest info)

.3 Nigeria: National Housing Fund (NHF)

• Run by the Federal Mortgage Bank of Nigeria (FMBN)

• Interest as low as 6%

• Up to ₦15 million loan

• Payback period up to 30 years

.4 Nigeria: Family Homes Fund (FHF)

• Helps with affordable housing

• Targeted at low-income and informal workers

• Offers low-cost loans and support

Smart Bank and Loan Alternatives

If normal bank loans are too expensive, try these:

.1 Microfinance Banks

• Offer small housing loans

• Easier to qualify

• But may have short repayment time

.2 Employer-Assisted Loans

Some big companies help employees buy homes by:

• Giving direct housing loans

• Partnering with banks to reduce rates

.3 Islamic (Shariah-Compliant) Home Financing

• Based on no interest (profit-sharing model)

• Available in some Nigerian banks and Kenyan Islamic banks

Refinancing and How It Works

.1 What is Refinancing?

It means replacing your current home loan with a new one that has a better interest rate or terms.

.2 When Should You Refinance?

• If interest rates have dropped

• If your credit score has improved

• If you want lower monthly payments

.3 Where Can You Refinance?

• Same bank (ask them for a better deal)

• New bank that offers lower rates

• Through government refinance programs like KMRC or NHF

.4 Pros of Refinancing

• Lower total payment

• Reduced interest burden

• Extended repayment time

.5 Cons of Refinancing

• May involve fees or penalties

• Could extend your loan duration

• You may need to re-qualify.

  Pros and Cons of Fixing High Mortgage Interest Rates (continued)

  Pros	Cons
  You pay less interest overall	May need upfront effort, paperwork
  Monthly payments become more affordable	Lower rates may come with stricter terms
  Easier to plan your finances	You may not qualify if your credit is poor
  Access to long-term homeownership	Refinancing may cost money or take time
  May improve your financial health	Some programs have income or job restrictions

  Case Studies and Real-Life Examples

  Let’s look at real examples of how people in Kenya and Nigeria have successfully dealt with high mortgage rates.

  ---

  .1 Example: John from Lagos, Nigeria

  John took a ₦10 million mortgage in 2020 at a 22% interest rate. He struggled with the monthly payments.

  What he did:

  • Joined a cooperative society at work

  • Refinanced his mortgage through NHF at 6%

  • Monthly payments dropped by over 50%

  • He now saves money every month

  .2 Example: Faith from Nairobi, Kenya

  Faith was planning to buy an apartment using a 15-year mortgage at 16%. She learned about the Affordable Housing Programme (AHP) in Kenya.

  What she did:

  • Registered with Boma Yangu

  • Qualified for a unit under KMRC financing

  • Got a mortgage at just 9.5% interest

  • Saved thousands in potential interest payments

  .3 Example: Joseph, a Kenyan Diaspora Worker

  Joseph works in Qatar and wanted to buy a home in Kenya. His bank offered 13% interest. He approached a SACCO with KMRC backing.

  What happened:

  • He got financing at 9.8%

  • Flexible repayment terms

  • Paid 40% less interest than bank rate

  .4 Example: Ada, a Nigerian Nurse

  Ada applied for a mortgage from a big Nigerian bank at 21%. She used her good credit record and stable income to negotiate a reduction to 17%.

  Lesson: Always ask for a better deal.

  Summary Table

  Here’s a quick summary of all the major points.

  Problem	Why It Happens	How to Fix It
  High mortgage interest rates	Central bank rates, inflation, bank risk	Improve credit score, choose better loan terms
  Expensive monthly payments	Long loan terms + high rates	Pay bigger deposit, refinance the loan
  Poor credit history	Missed bills, bad repayment record	Pay debts on time, check CRB/credit bureau
  Few affordable housing options	Weak government support, expensive banks	Use government schemes like NHF or AHP
  Lack of bank competition	Few players in mortgage market	Try SACCOs, cooperatives, or employer programs

  Frequently Asked Questions (FAQs)

  Here are clear answers to the most common questions about mortgage interest rates in Kenya and Nigeria.

  1. What is a good mortgage interest rate in Kenya or Nigeria?

  A good rate is below 10%. Anything between 6–9.5% (from government programs or SACCOs) is great. Bank rates often range between 13% and 24%.

  2. How can I reduce my mortgage interest rate?

  • Improve your credit score

  • Pay more deposit

  • Use government housing schemes

  • Refinance your mortgage

  • Compare different banks and SACCOs

  3. What’s the difference between fixed and variable interest rates?

  • Fixed Rate: Same rate throughout the loan. Easier to budget.

  • Variable Rate: Can go up or down based on the economy. Riskier.

  4. Can I negotiate my mortgage interest rate?

  Yes! Especially if you have:

  • A good credit history

  • A stable job

  • Better offers from other banks

  5. What is refinancing and is it helpful?

  Refinancing means taking a new loan to pay off your old one at a lower rate. It reduces your total payments and makes monthly payments easier.

  6. What is the KMRC and how can it help me?

  The Kenya Mortgage Refinance Company (KMRC) helps banks and SACCOs offer lower mortgage rates. Ask your SACCO if they partner with KMRC.

  7. What is the NHF in Nigeria and who qualifies?

  The National Housing Fund (NHF) is a government program offering 6% interest loans to Nigerian workers earning under a certain limit. It is managed by the Federal Mortgage Bank.

  8. Can students get mortgages in Kenya or Nigeria?

  Usually not directly, unless they have:

  • A stable income source

  • Collateral or co-signer

  • Are part of a working cooperative

  But students can start planning by saving early and building credit.

  9. Is it better to rent or take a high-interest mortgage?

  If the interest is too high and unstable, renting might be cheaper short-term. But homeownership builds long-term wealth. Try to reduce the rate before buying.

  10. Do SACCOs offer better interest rates than banks?

  Often yes. SACCOs are non-profit and member-focused. Many offer mortgage loans at lower rates with fewer conditions.

  11. Can I pay off my mortgage early in Kenya or Nigeria?

  Yes, but ask your bank about early repayment penalties. Some banks charge fees if you pay before the loan term ends.

  12. What is the minimum salary to qualify for a mortgage?

  It depends on the bank, but most banks require:

  • At least KSh 50,000/month in Kenya

  • Around ₦100,000/month in Nigeria

  Government programs accept lower incomes.

  Conclusion

  High mortgage interest rates in Kenya and Nigeria are a big barrier to homeownership, but they are not impossible to solve. With smart planning, knowledge, and the right tools, you can lower your interest rate and own a home affordably.

  Key Takeaways:

  • Always compare bank, SACCO, and government options

  • Use schemes like NHF (Nigeria) and KMRC (Kenya)

  • Pay more upfront to borrow less

  • Keep a good credit score

  • Refinance your loan if better rates appear

  • Ask questions and negotiate

  If you’re a student or working-class citizen, now is the time to start learning, saving, and planning. Don’t let high interest rates block your dream of owning a home.