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Should You Look for BLR or Interest Rate When Refinancing?

If you are thinking at the moment to refinance your property but not really sure it is the right time for you to do so, you may want to continue read on this post.

As in 2011 the BLR is on its uptrend and the rate may go even further up in the near future which is very unlikely for us to make a precise prediction. But looking back in 2008, when the global economy was having a downturn, and also the BLR. We been noticed the BLR was went down quite a lot for the following year after 2008.

An example is showing like this:

In year 2010:

BLR is 5.80% and Interest Rate is -1.90%

Thus, the actual interest rate that you need to pay for the home loan would be:

5.80% – 1.90% = 3.90%

While in year 2011:

BLR is 6.60% and Interest Rate is -2.40%

thus, the actual interest rate that you need to pay for the home loan would be:

6.60% – 2.40% = 4.20%

BLR and Interest Rate Tend To Get Fluctuated

In most home loan cases, the monthly installment would be depended on BLR minus Interest Rate. Therefore, even you are managed to receive an initial low monthly installment for the fist few months when you start to repay the loan, the loan will still getting fluctuate based on BLR.

Because of this, when applying for housing loan, you should look at the BLR – X% instead of BLR since BLR is fluctuating from time to time. So when you get a loan offered by a bank, you should just focus on the – X%.

For Example:

A loan at 2008 that having a BLR – 1.9% will have actual Interest Rate of 5.80% – 1.90% = 3.90%. And in 2011, this actual Interest Rate has increased to 6.60% – 1.90% = 4.70%.

And if you choose to refinance, you will receive a new interest rate of 6.60% – 2.40% = 4.20% which is lower than your previous home package. However, you still need to include the penalty, legal fees and other charges that incurred for your refinance.

In addition, the refinance still need to depends on other issues such as: Do you get a refinancing with lower monthly installment? Can you cash out any money from your property? Are you getting shorter payback tenure?

You are able to get different view points when you make the decision to go for the right home loan package depends on your purpose.

Future BLR and Interest Rate

As of now, U.S. may facing a tough economy but we still having no idea whether the world economy will get affected and end up causing the overall poperty market in Malaysia having decrease in the price, BLR and interest rate.

If you are having no idea on future economy, then it may be good for you to choose for fixed rate package. Currently, the average interest rate is about 4.85% per annum and by doing so you will not having to worry about the BLR fluctuating anymore. Such loan package is rather secure since the monthly installment and also the interest rate is fixed with your loan tenure.

Lets say if you receive BLR – 2.40%, then you will get 6.60% – 2.40% = 4.20% per annum for your loan. And with fixed rate, you will ensure yourself that you will enjoy this rate no matter how the rate going up or down in future.

Base Lending Rates in Malaysia for 2011

Updated Base Lending Rates

As you need to know that Base Lending Rates (BLR) is actually a base interest rate calculated by banks and financial institutions based on a mathematics formula that includes the banks and financial institutions administrative costs as well as cost of funds. The BLR tend to vary from time to time and you can refer to below table for the BLR published by different banks in Malaysia in May 2011.

Last Reported BLR : 6.60% (Effective Since 11 May 2011)

No. Banking Institution Effective Fr. BLR (% p.a.)
1 Affin Bank Berhad 12/05/2011 6.60
2 Alliance Bank Malaysia Berhad 13/05/2011 6.60
3 AmBank (M) Berhad 13/05/2011 6.60
4 Bangkok Bank Berhad 13/05/2011 6.60
5 Bank of America Malaysia Berhad 13/07/2010 6.30
6 Bank of China (Malaysia) Berhad 14/07/2010 6.30
7 Bank of Tokyo-Mitsubishi UFJ (Malaysia) 11/05/2011 6.25
8 CIMB Bank Berhad 11/05/2011 6.60
9 Citibank Berhad 13/05/2011 6.60
10 Deutsche Bank (Malaysia) Berhad 13/05/2011 6.50
11 EON Bank Berhad 13/05/2011 6.60
12 Hong Leong Bank Berhad 13/05/2011 6.60
13 HSBC Bank Malaysia Berhad 12/05/2011 6.60
14 J.P. Morgan Chase Bank Berhad 15/07/2010 6.20
15 Malayan Banking Berhad 11/05/2011 6.60
16 OCBC Bank (Malaysia) Berhad 12/05/2011 6.60
17 Public Bank Berhad 11/05/2011 6.60
18 RHB Bank Berhad 11/05/2011 6.60
19 Standard Chartered Bank Malaysia Berhad 13/05/2011 6.60
20 The Bank of Nova Scotia Berhad 16/05/2011 6.60
21 The Royal Bank of Scotland Berhad 15/07/2010 6.00
22 United Overseas Bank (Malaysia) Berhad 12/05/2011 6.60

Source : Bank Negara Malaysia
Rates changed since 13/05/2011
Rates updated on 13/05/2011

Base Lending Rate Revise To 6.60% Effective May 2011

Bank Started to Increase BLR

11 May 2011 – Most of major banks in Malaysia has started to increased its base lending rates (BLR) by 30 basis points each, effective May 11. Up to-date, Maybank, Public Bank, Affin Bank, RHB Bank, UOB Bank and Bank of Tokyo-Mitsubishi UFJ has made their BLR increases announcement.

The BLR will be increased by 30 basis points from 6.30 per cent per annum to 6.60 per cent. The base financing rate (BFR) of Islamic Banking will similarly be revised upwards by 30 basis points to 6.60 per cent from 6.30 per cent.

The last revision in banks BLR and Islamic banking’s BFR was on July 13 last year when both were revised from 6.05 per cent per annum to 6.30 per cent after BNM raised the OPR.

Last Reported BLR : 6.60% (Effective Since 11 May 2011)

(Rate refreshed on 14th June 2011)
BLR is a minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions’ cost of funds and other administrative costs. This is defined by central bank of the countries.

The Overnight Policy Rate (OPR) from Bank Negara Malaysia is reference for banks in BLR adjustments, but there might differ from bank to others bank. At the global money market down turn, BLR will get lower and if the money market on uptrend, it will correlation upward. It is wisely and timely to consider take up mortgage loan and start to own your property at the lower BLR as current.

From the record, it shows that the highest BLR Malaysia ever has is 12.27% in year 1998 and the lowest BLR is 5.55% in year 2009. The average is 8.1%. Probably you can use this to justify whether it is better to take the fixed rate loan or floating mortgage loan (BLR +/- x% ). Below table shows the Malaysia Base Lending Rate (BLR) record from year 1989 to year 2011.

Source from : Malaysia Base Lending Rate

Base Lending Rate (BLR) in Malaysia

What is Base Lending Rate (BLR)?

Base Lending Rate (BLR) is a base interest rate calculated by banking institutions based on a mathematics formula that takes into consideration the institutions cost of funds as well as other administrative costs.

You may refer lending rate as simple interest rate. It is a rate which your bank going to charge you in a percentage. In case you loan for RM50,000 and the interest rate of your loan is 7%, The loan that you carried will get accrue to RM3,500 for interest after one year in case you didn’t repay your loan payments. The base interest rate can let you know the basic information on the amount of the money your bank is charging you for the interest each year. Remember that in case you repay your loan payments throughout the year which lower the principal amount of your bank loan, the amount on which the interest has been charged will getting lower as well as the interest that you need to pay.

Refer to wikipedia for more explanation on base lending rate.

Malaysia Base Lending Rate ( BLR ) from 27 December 2010.

No. Banking Institution With Effect From BLR (% p.a.)
1 Affin Bank Berhad 13/07/2010 6.30
2 Alliance Bank Malaysia Berhad 13/07/2010 6.30
3 Alliance Islamic Bank Berhad 13/07/2010 6.30
4 AmBank (M) Berhad 13/07/2010 6.30
5 Bangkok Bank Berhad 14/07/2010 6.30
6 Bank of America Malaysia Berhad 13/07/2010 6.30
7 Bank of China (Malaysia) Berhad 14/07/2010 6.30
8 Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad 14/07/2010 6.00
9 CIMB Bank Berhad 13/07/2010 6.30
10 Citibank Berhad 13/07/2010 6.30
11 Deutsche Bank (Malaysia) Berhad 15/07/2010 6.30
12 EON Bank Berhad 14/07/2010 6.30
13 Hong Leong Bank Berhad 14/07/2010 6.30
14 HSBC Bank Malaysia Berhad 13/07/2010 6.30
15 J.P. Morgan Chase Bank Berhad 15/07/2010 6.20
16 Malayan Banking Berhad 13/07/2010 6.30
17 OCBC Bank (Malaysia) Berhad 13/07/2010 6.30
18 Public Bank Berhad 13/07/2010 6.30
19 RHB Bank Berhad 13/07/2010 6.30
20 Standard Chartered Bank Malaysia Berhad 13/07/2010 6.30
21 The Bank of Nova Scotia Berhad 14/07/2010 6.30
22 The Royal Bank of Scotland Berhad 15/07/2010 6.00
23 United Overseas Bank (Malaysia) Berhad 13/07/2010 6.30

This BLR table is just for your reference. You should check with respective for the latest base lending rate.

The table shows the Base Lending Rate (BLR) record for Malaysia from 1989 to 2010.

Year BLR (%) Remark
2010 6.30 Adjusted July 2010
2010 6.05 Adjusted May 2010
2010 5.80 Adjusted March 2010
2009 5.55 n/a
2008 6.75 Adjusted March 2009
2007 6.75 n/a
2006 6.00 n/a
2005 6.00 n/a
2004 6.00 n/a
2003 6.50 n/a
2002 6.50 n/a
2001 6.75 n/a
2000 6.75 n/a
1999 8.00 n/a
1998 10.50 n/a
1997 9.25 n/a
1996 8.50 n/a
1995 6.60 n/a
1994 8.25 n/a
1993 9.50 n/a
1992 9.00 n/a
1991 7.50 n/a
1990 7.00 n/a
1989 7.00 n/a

The base lending rate has remained more or less the same throughout the years. For Malaysia, the highest BLR rate ever experienced was 12.27% during the South East Asia financial crisis in year 1998. With the interest rates of the bank interest rates decreasing, many home owners will want to go for refinance their house. The recommended principle for house refinancing will be at the time when BLR is at least 1% lower compare to the rate for your existing property at the time you signed for the loan. Besides, you have as well to be aware of additional circumstances such as the value of the property value as well as your earning.

Most banks in Malaysia are undergo restructuring and merging, and the 6.5% BLR is expected to continue to be for some time until except in cases where the home and property bubble bursts and banks have to revamp in line with the situation of regional economy.

You may occasionally refer to this site for latest base lending rate changes that are changing from time to time.