This study sought to investigate the effect of bank characteristics on lending rates among commercial banks in Kenya. Specifically the study sought to; establish the effect of bank size, credit risk, and liquidity risk, operating costs, on lending rates among commercial banks in Kenya. The research philosophy for this research was positivism. Explanatory non-experimental research design was employed. The target population was thirty nine (39) commercial banks from whom secondary data was collected by way of census since these are the banks from which complete information could be obtained for meaningful analysis for the study period 2006-2015. Descriptive Statistics including Mean, Standard deviation, inferential statistics (Panel regression analysis and Correlation analysis) were carried out. Data analysis was run on the Stata 13 package and findings presented in figures, tables, graphs and charts while deriving conclusions and recommendations from the findings of the study. The finding revealed that bank size, operating costs, had positive and significant effects on lending rates. However the effect of GDP growth rate and bank size was found to be negative. The finding further showed that the effects of credit risk and liquidity risk on lending rates was positive but insignificant. Based on the findings, the study concluded that bank characteristics play a significant role in determining the lending rates of commercial banks. The study recommends that individuals wishing to take mortgages home equity loans, car loans, and personal loans from commercial banks should consider the size of the banks, its market share and other internal factors to identify the most competitive banks in terms of lending rates.
