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Co-op customers to use pension as mortgage

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Capital Markets

Co-op customers to use pension as mortgage


COOPBank

A Co-op Bank branch in Nairobi. FILE PHOTO | NMG

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Summary

  • The new facility, which is being issued in partnership with Enwealth Financial Services Limited, targets pension scheme members whose maximum allowed pension benefits for buying a house cannot cover the full asking price of the targeted house.
  • The partnership will see Co-op Bank extend a mortgage to such pension members to cover the shortfall, with the house serving as the collateral.

Co-operative Bank of Kenya #ticker:COOP has launched a pension-backed mortgage facility that will allow customers to own a home through a mix of their pension contributions and a long-term loan.

The new facility, which is being issued in partnership with Enwealth Financial Services Limited, targets pension scheme members whose maximum allowed pension benefits for buying a house cannot cover the full asking price of the targeted house.

The partnership will see Co-op Bank extend a mortgage to such pension members to cover the shortfall, with the house serving as the collateral.

“We are excited to pioneer this innovation that will enable a wider pool of Kenyans to realise their dream of owning a home,” said Jacqueline Waithaka, Co-op Bank director for corporate institutional banking.

The pension-backed product looks set to grow Co-op’s owner-occupier residential mortgages from the current Sh12 billion. Non-residential mortgages stand at Sh32.8 billion. It has a repayment period of up to 20 years, subject to the retirement age of the borrower. Currently, the average tenue for a mortgage in Kenya is 11 years.

The mortgage facility also opens room for over three million members of pension schemes in Kenya, many who struggle to raise money to buy a home, to qualify for a mortgage.

The Co-op product comes on the back of the Retirement Benefits (Mortgage Loans) (Amendment) Regulations 2020 that paved way for members of pension schemes to use part of their benefits to buy a home.



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