Dear all, would like to invite some discussion to help understanding the differences of the above.

Noticed that there are plenty of Loans offered with BLR minus xx%, but some new breed came to town recently, ie MLR minus yy%, KLIBOR + zz%.

BLR is at 5.55% now, set by BNM and commercial bank will benchmark against it.

MLR is currently used by OCBC i think, 4.7% now, claimed to be set by BNM also, but no other benchmark as no one using.

KLIBOR, usually it's the most basic rates used by banks to borrow/lend to each other. I am guessing this is among the most fundamental rates that the cost of credit.

Islamic loan, a breed that I never understand enough. Please see quote below, and apprecaite some experts can share how islamic loan really works..



Some common questions, how they relate and which one is better??

KLIBOR is updated quarterly, most active index among the list above, it will go both up/down but progressively. As mentioned earlier, one of the most fundamental interest basis for borrowing money. If OPR changed, this will be expected to changed very soon. Fluctuate and react fastest to sentiment of economy, e.g. GDP, inflation, OPR?

BLR determined by BNM, it probably does not move as much as KLIBOR, but should be the same trend as KLIBOR with spread widening/narrowing? BNM decides, probably will be more consumer centric and syphoned off fluctuation due to short term market heat, hence does not move often favoring consumers.

MLR not so familiar, guess it's the same as BLR. Islamic no idea.

Above is my personal understanding, humbly inviting comments and corrections pls.

As far as i know,

Islam strictly forbids the giving or taking of interest on any loan in any amount. Interest is defined as a set return on a loan, and as such implies a profit based on no risk or effort – a principle completely against Islamic ideals. Financial profit is a result of effort or risk (or both), and interest seeks to undermine the risk-based nature of trade.

http://www.islamonline.net/english/introdu...article01.shtml

Noed, this is a very good thread

Btw, in real life, KLIBOR fluctuates on a real time basis, no? Does the SCB KLIBOR loan rate changes on quarterly only?

Thanks, trying to learn with everyone's sharing.

Heard it more than once the mortgage agent telling me it changes on quarterly. Actual KLIBOR should be changing on real time basis, but maybe SCB only reflect the changes once every quarter?? It will be messy to calculate the new installment/interest for each and every customers on real time basis

Personally, I dont favor KLIBOR type, because of its nature of sensitivity to business market sentiment. Until somebody can enlighten me, I still prefer BLR which is control by BNM (protecting consumers). Apologies to any SCB agents

May I know the meaning of these acronyms?
BLR
MLR
KLIBOR
GDP
OPR
SCB

Thanks

Cheers

BLR - Base Lending Rate

GDP - gross domestic product

opr - overnite policy rate

klibor - Kuala Lumpur Inter-bank Offered Rate

mlr - minimum lending rate

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Added on September 8, 2009, 9:28 amSCB ? - Standard Chartered Bank. hehe!

This post has been edited by shiman: Sep 8 2009, 09:28 AM

Correction... MLR means Mortgage Lending Rate

Actually, with all this new "benchmark" of interest rate, I still think BLR serves as a better base. Mainly because all (or most) banks have loans based on it. While the others are still relatively new and we can't quite use it to compare.

Assuming no big fluctuation in interest rates, the effective rate charged by the banks are equally competitive despite using a different benchmark rate. I'm not too sure about Islamic, but my basic understanding is the interest rate generally have a upper cap limit (max interest rate), but doesn't quite adjust downward from the day the loan agreement is signed.

One related question would be, in short to medium term i.e. 1-5 yrs time, do you think interest rate will be trending upwords or downwords.

As long as the interest rate stays stagnant, all the different packages, BLR/MLR/KLIBOR/Islamic should be about the same, since their business were written at around the same time under competitive environment. Question is when interest rate moving away in the future from where we are now, how would that movement impact each type of BLR/MLR/KLIBOR/Islamic assuming you already locked in a certain package today.

It has been mentioned many times, if Buy Buy Buy without thinking thru the hard question of whether i can afford if interest rate goes up by 1 or 2 notch, it is very unwise and scary.

Comparison between BLR and KLIBOR
http://moneysospecial.com/mortgage-loan/blr-vs-klibor/

Review for MLR offer by OCBC
http://moneysospecial.com/mortgage-loan/ocbc-ideal-mortgage/

Thanks for the quick case study and very comprehensive extraction of BLR and KLIBOR historical rates.

As some of the observations in your post, the gap between BLR and KLIBOR were smaller ~3.1% when BLR was at 6.75%, but higher now with BLR standing at 5.55%, the gap is 3.4%.
If the trend follows, when interest rate rise again (due to whatsoever reason, especially when inflation inevitably kicks in), BLR will rise and maybe the gap will become smaller again, ~3.1% or smaller.

But looking at your chart, say if over very short period of say 2 yrs, saving 0.25% a year can help subsidise those exit penalties for flippers. But then again, your other post of MLR showing a plan with 3 yrs lock in which will be more appealing for this group of ppl

Disclaimer, for sharing purpose, not suggesting any plan better or worse, please select the plan that suits your risk appetite. Thank you.

Thanks, you did a good review as well.

I do agree with you that the gap is bigger now so the KLIBOR package looks more attractive. But when the gap become smaller, KLIBOR package actually cost higher.

About the penalty(which mostly happen to investor), as mentioned in the MLR blog, there’s one alternative to avoid penalty.

BLR - Base Lending Rate = BLR is a minimum interest rate calculated by financial institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.

OPR - overnite policy rate = One of the tools of Monetary policy for the Central Bank (BNM) to attain a set of objectives oriented towards the growth and stability of the economy.

KLIBOR - Kuala Lumpur Inter-bank Offered Rate (KLIBOR)= an interest rate derived from the activities of borrowing and lending funds in the professional inter-bank market. There is a futures controct for this KLIBOR in Malaysia

BLR + KLIBOR = playing fields of bankers... hahaha..besides from making money from the loan out money.. they can hedge, swap, arbitrage and speculates.

This post has been edited by moody5: Sep 11 2009, 12:27 PM

MLR that OCBC used is actually based on their KLIBOR rate. It's just another acronym.

Are you confirmed the MLR is based on KLIBOR rate instead of OPR/BLR or other benchmark as the calculation was not made to public?

Because the KLIBOR rate is big different to MLR rate and I don't is the same.
KLIBOR = 2.13 %
MLR = 4.70%

What I heard is it's based on KLIBOR. Or maybe they benchmark it against KLIBOR.
Any OCBC banker here?....

Maybe the calculation is the myth.

But from the OCBC agent,
BLR is calculated based on OPR, bank cost of funding, bank business cost

MLR is calculated based on OPR, mortgage cost of funding, mortgage business cost

http://cforum2.cari.com.my/viewthread.php?...e=1#pid62202223

Thanks for the clarification...

KLIBOR based mortgage - this is proved to be a failure product in Hong Kong. KLIBOR based products fluctuate too high compare to BLR. The difference btw KLIBOR and BLR based loan is not justifiable considering investor is taking more risk into taking a KLIBOR based products which has more uncertainty.

Islamic mortgage - There is no prepayment allowed. Don't believe me? Ask them to show you the amortization table. Dunno what is amortization? Google is your best friend.

MLR - no comment.

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Added on September 14, 2009, 10:36 pmKLIBOR based mortgage - this is proved to be a failure product in Hong Kong. KLIBOR based products fluctuate too high compare to BLR. The difference btw KLIBOR and BLR based loan is not justifiable considering investor is taking more risk into taking a KLIBOR based products which has more uncertainty.

Islamic mortgage - There is no prepayment allowed. Don't believe me? Ask them to show you the amortization table. Dunno what is amortization? Google is your best friend.

MLR - no comment.



This post has been edited by novabankinghall: Sep 14 2009, 10:36 PM

Thanks. You make a very good point here.

Take Islamic Flexi loan, no need to do prepayment. Just dump money in the current account and automatic save interest. Extra benefit like waived RM10 monthly fee, capped max rate at 9.9%, some bank even give some interest for the money in the current account also. Penalty and lock in, same like normal conventional flexi loan also, 3% to 5% base on outstanding balance. Nowadays a lot banks also make their Islamic package very attractive.

MLR rate revised to 4.40% now, from 4.70%

Thanks for the updates.
So what is the offer by OCBC now? when it was 4.7%, can do minus 1.2%? now 4.4% do minus 0.9% ??

The package still remain same, MLR - 1.3%, which is 3.1% p.a.

So we now observes that the MLR and BLR does not move in tandem. OCBC going aggressive on housing loan? any Agents with the latest OCBC offer?

^^ Nevermind, found some example in the current financing package thread. Thanks.

This post has been edited by noed18: Oct 19 2009, 12:40 PM

OCBC Home Loan
MLR -1.3% Whole Tenure
Current MLR 4.4%
3 years bonding period
early exit fee 2% on loan amount
other t&c apply

=P

Oh ya i took MLR too.... is a non NZEC

all is bank pattern , some low rated , no free legal fees,. some free legal free high rate.
but all same. just up to u , if more money but dont ilke put in all , u can use some saving in bank , then bank reduce yr houseloan .
other one need open account fees , some dont need , but rate same ...

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Added on October 29, 2009, 2:35 pmall same lah , some need paid legal fees............

This post has been edited by mchlkeys: Oct 29 2009, 02:35 PM