Posted On: 25-03-2025
How to Navigate Falling Interest Rates and Protect Your Money.
"Interest rates are like the heartbeat of the economy. When they drop too low, some sectors thrive, while others struggle to survive." – John Wanjala, Financial Analyst
Kenyan banks have slashed deposit interest rates to 9.76% as of February 2025, marking a 15-month low. This means that the money you keep in savings accounts or fixed deposits is earning you less than before. Meanwhile, government securities like Treasury bills and bonds are also offering lower returns, affecting investors and retirees who depend on them for steady income.
At the same time, lending rates, which hit a peak of 17.22% in November 2024, have only slightly dropped to 16.41%. Borrowing is still expensive, making it harder for businesses and individuals to access affordable credit.
The big question now is: What does this mean for your money, investments, and future financial security? And most importantly, how can you navigate these changes and even benefit from them?
What Are Falling Interest Rates?
Interest rates refer to the cost of borrowing money and the return on savings or investments. When interest rates fall, it means:
Banks pay lower interest on savings accounts and fixed deposits. If you are saving money in a bank, it will grow at a slower rate than before.
Government bonds and Treasury bills offer lower returns. These are popular investment choices for retirees and pension funds, so lower rates affect their income.
Loans become slightly cheaper, but banks are slow to reduce lending rates, meaning borrowers are not seeing significant relief yet.
Interest rates in Kenya are controlled by the Central Bank of Kenya (CBK), which adjusts them depending on the economy. The CBK Monetary Policy Committee (MPC) is set to meet on April 8, and their decision could either stabilize rates or push them even lower.
Why Are Interest Rates Falling?
There are a few key reasons why banks and the CBK are lowering interest rates:
Encouraging Borrowing and Economic Growth – Lower rates make it cheaper for businesses and individuals to take loans. This can stimulate economic activity, helping businesses expand and create jobs.
Controlling Inflation – If inflation is slowing down, the CBK reduces rates to keep money moving in the economy.
Global Economic Trends – Many central banks worldwide are lowering rates to support economic recovery, and Kenya is following the trend.
What This Means for You as a Common Citizen or Investor
If you are a saver, retiree, or investor, falling interest rates can affect you in different ways.
1. Your Savings Will Earn You Less Money
If you are used to keeping your money in a savings account or fixed deposit, your returns will now be lower than before. For example, if you used to earn KES 50,000 in annual interest on a fixed deposit, you may now earn only KES 35,000 or less.
➡ Solution: Instead of relying on fixed deposits alone, consider alternative investments like real estate, stocks, or dividend-paying funds that can offer higher returns than traditional bank savings.
2. Government Bonds and Treasury Bills Will Offer Lower Returns
If you are an investor or retiree who depends on government securities for income, you will now earn less from these investments. Pension funds also rely on government bonds, so this could affect future retirement payouts.
➡ Solution: Diversify your investments. Look into corporate bonds, money market funds, or private pension schemes that may provide better returns in a low-interest environment.
3. Loans Are Still Expensive, But Refinancing Might Help
Even though interest rates are falling, banks are slow to lower lending rates. However, if you already have an existing loan, you may be able to renegotiate or refinance it at a lower rate, saving you money on repayments.
➡ Solution: Shop around for better loan rates or consider refinancing options to reduce your interest costs.
Where Are Interest Rates Headed?
Looking at historical data, Kenya has experienced interest rate cycles where rates go up and down depending on the economic situation.
In 2011, rates shot up to over 20% due to high inflation.
In 2016, the government introduced interest rate caps, which reduced borrowing costs but made banks reluctant to lend.
In 2023-2024, rates climbed again due to inflation and currency fluctuations.
Now, in 2025, rates are falling again, but the pace of decline is slow. If inflation remains stable and the economy improves, we may see further cuts by the CBK, meaning savers will earn even less while borrowing may become slightly cheaper.
How to Navigate and Even Benefit from Falling Interest Rates
If you want to stay ahead of the changing financial landscape, you need to adjust your financial strategy. Here’s how:
1. Move Your Savings to Higher-Yield Investments
Instead of keeping all your money in a savings account, consider:
✅ Money market funds – These offer better returns than savings accounts.
✅ Dividend-paying stocks – They provide regular income and long-term growth.
✅ Corporate bonds – They often have higher interest rates than government securities.
"The key to surviving a low-interest environment is diversification. You cannot rely on one type of investment." – Susan Muthoni, Retirement Planning Expert
2. Rethink Your Pension and Retirement Strategy
If you are planning for retirement, now is the time to adjust your strategy to ensure your savings last longer. Consider:
✅ Private pension schemes with higher returns.
✅ Investing in income-generating assets, like rental properties or businesses.
✅ Seeking professional retirement planning advice to optimize your pension fund growth.
"Retirement planning is not just about saving money. It is about ensuring your savings grow enough to sustain you." – Dr. Lydia Kimani, Financial Advisor
3. Take Advantage of Falling Loan Rates – But Be Smart About Borrowing
If you have existing loans, check whether you can:
✅ Renegotiate a lower interest rate.
✅ Refinance to a cheaper loan option.
✅ Take advantage of better mortgage rates if you plan to buy property.
"Lower interest rates can be a golden opportunity to reduce debt if used wisely." – Alex Otieno, Economic Analyst
Secure Your Financial Future – Join Zurit Consulting’s Retirement Planning Training
With falling interest rates, simply saving money is no longer enough. You need a clear investment and retirement strategy to ensure long-term financial stability.
Zurit Consulting invites you to our exclusive Retirement Planning Training from April 14th to 18th in Mombasa, where financial experts will provide practical insights on navigating the changing financial landscape and optimizing your retirement savings.
Key Takeaways from the Training
✅ Understanding the impact of interest rate changes on pension savings
✅ Exploring alternative investment strategies beyond traditional fixed deposits
✅ Structuring pension schemes for long-term sustainability
✅ Maximizing returns in a low-interest environment
📅 Date: April 14th - 18th, 2025
📍 Venue: Mombasa
📞 To Register: Call 0759 092412 or email info@zuritconsulting.com
Your retirement should not depend on uncertain interest rates or outdated savings strategies. Take control of your financial future today and ensure a stable, worry-free retirement.