If you are an Equity Bank customer you may be used to the 13% interest rate per year on overdraft and commercial mortgage loans. However, as of publishing this post, the interest rates have increased.
New Mortgage and Overdraft Loans Interest Rates
A memo sent to Equity Bank customers indicates that the bank received approval from the Central Bank of Kenya (CBK) to implement risk-based pricing when lending to customers. Part of the memo is available below.
The new interest rates will be 12.52% per annum for the Bank Reference rate plus a margin of a maximum of 8.5% per annum. The specific customer who shared the memo above is being charged a total interest rate of 18% per annum for both overdraft and commercial mortgages.
This is a directive that came from CBK which means that other banks will also raise their interest rates from what they were initially charging.
This is likely to see many businesses, particularly commercial real estate investors who had made plans to pay back their loan at a 13% interest rate struggle to pay as the new rates apply to both existing and new loans.
Definition
Overdraft loan: Allows you to continue withdrawing money from your bank account even when you have zero balance or insufficient funds. However, there is a limit to how much you can withdraw.
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