Kenya's two largest mortgage lenders are optimistic that home loans costs may touch two-year lows after March 4 if the country goes through a stable transition.

Joram Kiarie, the divisional director for KCB's S&L Mortgages, said the lender could cut the mortgage rate to 14.5 per cent from the current 16 per cent in the next few months and further to the early 2011 levels if all factors balance out.

"This can be accomplished within this year if the country goes through a peaceful transition and the macroeconomic environment remains stable," he said.

S&L's rate was 13.5 per cent in the first half of 2011. For now, the lender is keenly watching the run-up to the elections whose outcome will determine the direction the rate for home loans will take.

"All indications are that things are fairly stable. If we (Kenya) keep it that way, make the right decision and respect the majority's choice, then we can expect that the rates will come down on the basis of reduced risk and a stable foreign exchange component," said Kiarie.

Both S&L Mortgages and stand-alone mortgage lender Housing Finance have said sales rebounded in the fourth quarter of 2012 when the Central Bank Rate started heading down.

"Overall activity has picked up since around October when we reduced our lending rate to 18 per cent," said Frank Ireri, the Housing Finance managing director.

He said besides the decision of the next Monetary Policy Committee meeting and the prevailing deposit rate, a lot will depend on the conduct of the polls to impact on the lending rate positively or negatively.

"It all really depends on the events of the next four to five weeks before the next MPC meeting. Already, there is pressure on the shilling and there may be an impact of election spending," said Ireri.

A mortgage report released by The Mortgage Company (TMC) and HassConsult showed Barclays had the lowest rate in the fourth quarter at 15.5 per cent.

Overall, high net-worth individuals access lower rates than a lender's headline interest rate on offer at a bank. For instance, S&L's Mortgage Advantage loan is half a percentage point lower at 15.5 per cent.

"This loan is extended to individual home buyers who are earning a net of Sh150,000 and above and only taking one loan even if for a second home. These high net-worth customers include Kenyans in the diaspora," said Kiarie.

Housing Finance, on the other hand, has special rates for corporate schemes, funded and non-funded by the specific companies in the deal.

"Our margin is usually around four per cent. Company funded schemes are thus cheaper while non-funded ones are a bit higher," Ireri said.

Home loans had come down to as low as 11 per cent for ordinary walk-in customers in the first half of 2011 before a weak shilling and high inflation took a toll on the cost of funds for lenders.