12 banks were ordered by the Competition Authority of Kenya (CAK) to review unfair mortgage contract terms and conditions. [Photo/ Mary MM]
12 banks were ordered by the Competition Authority of Kenya (CAK) to review unfair mortgage contract terms and conditions. [Photo/ Mary MM]

12 banks were ordered by the Competition Authority of Kenya (CAK)to review their mortgage contracts over the inclusion of various hidden costs in the Terms and Conditions (T&Cs).

CAK undertook a review of the home loans contracts offered by 27 banks, and found 12 to be in breach of regulatory provisions. The information provided to customers was deemed incomplete, unclear, and unfavourable.

The hidden costs for origination, booking, valuation, mortgage and title transfer, commissions, brokers’ fees, legal fees, insurance and stamp duty can drive up the mortgage rate by over 10 percent.

The 12 lenders whose contracts were deemed unfair include; KCB Bank, NCBA Bank, Absa Bank Kenya, DIB Bank Kenya, Mayfair Bank, Consolidated Bank, Victoria Commercial Bank and Bank of Baroda.

They were ordered by CAK to review the contracts. 11 of the banks complied with the directive while one requested for more time, CAK confirmed.

“From the reviewed T &Cs, twelve (12) banks were found to be non-compliant with Section 56 of the Act on unconscionable conduct and consequently they were required to revise their T&Cs.”

“As at 30th June 2021 eleven (11) banks had revised their terms and conditions and informed the Authority of the rollout while the remaining one (1) requested for an extension of time,” CAK Director-General Wang’ombe Kariuki noted in the 2021 Auditor-General’s Report.

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It is hoped that the push to ensure compliance will result in more affordable home loans for consumers, devoid of hidden costs. As of December 2020, there were 26,971 mortgage loans in the market in December 2020.

The mortgage loans market is dominated by a few major lenders, most of whom feature in the CAK’s list of institutions offering flawed contracts. NCBA, Absa Bank Kenya, KCB and DIB all rank among the top 10 mortgage lenders in Kenya according to Central Bank of Kenya (CBK) data.

The Central Bank of Kenya (CBK) Annual Banking Report highlighted the need for simplification of mortgage contracts to encourage their uptake.

“Institutions suggested a number of measures to be put in place to support the residential mortgage market in Kenya. Some of the suggested measures include streamlining and simplifying the legal and regulatory process governing the mortgage sector for transparency, efficiency and certainty,” the report reads in part.

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