Hi all,

I just got my loan offer letter from the bank. There is a clause stating:-

"In the event the difference between the OPR (Overnight Policy Rate) and the BLR (Base Lending Rate) declines to below 2% during the loan tenure, the Bank reserves the right to increase the prevailing interest rate to BLR + 0%."

Can anyone tell me what does this means?

Thanks

I assuming your interest rate is spread below the BLR. Eg. BLR-XX.XX%

OPR is the rate charged between banks. So basically if the difference gets less tahn 2%. The bank might not be making money, or worse case, actually lose money.

So put in simple terms, its basically the bank setting a minimum interest rate, in the event Bank Negara decides to lower BLR to a very low level.

I'm guessing that current contract you have would be BLR-ve%.
So it's saying that one day when the OPR difference and BLR is only like 2%, they would charge you BLR+0% instead of the original term -ve%.

If the interest rate is reduced lower than 2% at any given time during the serving period of loan, the bank has the right to adjust your prescribe rate* to BLR +0%.

*Prescribe rate = the offered interest rate.

or in layman terms, if the difference between OPR n BLR decrease to 2% or lower,bank has the right to adjust your HL rate to BLR +0%

ie;

assuming you current offered rate is BLR -1.90%, where BLR is at 5.80%. OPR is at 2.50% (5.80% - 2.50%=3.30%)

2 years down the road the BLR is reduced to 3% (yay~ ) and OPR remains at 2.50%. The difference will be, 3.00%-2.50%=0.50%.

if such event occurs, the bank will adjust the your interest rate to BLR +0% (3.00% + 0%) = 3% pa

if i'm not mistaken this is found on a local bank's TnC...

anyway, hope the above helps. Let me know if u need a further elaboration.

edited for some clarification.

This post has been edited by merce: Apr 27 2010, 11:41 AM

OIC, is this a common term for all the banks?

Yes its common.

Though the situation in question is very unlikely.

Hey thanks all for clearing my doubt

However, the loan that i get is fixed rate of 4% for first 3 years. Does it mean that if 1 day the BLR is 6% while the OPR is 5%, then the bank will revised it to 6% for my loan?

sorry for noob question, first time buyer...

yes. =)