which one is better with low BR rate but high spread (BR +) or high BR rate with low spread (BR+) ? If both bank is offer the same BLR 4.45

1. 3.20% + 1.25%
2. 4.00% + 0.45%
I heard that 2. wil be better.. coz the BR rate may change time to time. +1.25% or 0.45% wil be fixed during loan tenure

In this Case, 2 is better cos the potential upside is higher

When the Bank become more efficient, can have better rate cos @ 4% to 3.2%, the Bank can still try to improve

But plus 1.2% shows the Larger Bank's GREED

Hmm.. if BLR is no longer applicable now, does it mean that our existing loan will be peg at the current BLR rate?

For existing loan will still peg to BLR until the end. BLR will be reflect by OPR......

That's all I know...... But not sure good or not....

If the effective lending rate in both scenarios are the same, I suppose it will be indifferent. Changes in BR are triggered by the change in OPR and SRR or less frequent the change in market funding condition (which may trigger a change in OPR). As these are the changes in macroeconomic indicators, most (if not all) of the banks will likely make the same adjustments.

a quick check, will any of these amount be subjected to GST:

a) Drawdown release by bank to developer for progressive payment
b) Monthly housing loan installment

Afaik - nope.

BLR and BR has vast differences. Currently effective rate between both may look small or none because the BR reference rate is revised in quarterly basis (at this point). The fact is, ref rate moves in tandem with KLIBOR and Interbank rate in daily basis but to minimize market shock, BNM has limited the volatility to quarterly basis.

For instance, the avg inter-bank rate from 8/1/15 - 9/1/15 was around 3.85% compare to normal 3.3% (due to weak RM amid of selling pressure from RM). Though the Ref rate is not entirely tied only with KLIBOR/Inter-bank (other factors i.e individual bank deposit/loan ratio also count), but the trend is tied closely with how the KLIBOR/Inter-bank goes. Which means in other words, if Ref rate is in daily basis, the effective lending rate for 8/1/15 till 9/1/15 will rise by slightly above 50 basis point to about 5.2%.

There is a valid reason why BNM want to implement BR instead of BLR. The disadvantages of BLR is, it fails to reflect the true cost of lending versus each individual banks' strengths. Unless BLR is revised regularly, it has quietly moving away from the market trends and could pose serious problems if certain bank over lend without enough coverage (with enough deposit for example). The over-extended financiers will have little bullet to cover during a crisis. For instance as what is happening now, we have non-stop outflow of foreigner funds and depreciation of currency, not to mention how long the rout in oil will end which will definitely put a salt to injury to our already weak economy that Malaysia (both private and public) is quite dependent on.

In short, in laymen term, under the new BR framework:

We will enjoy lower effective mortgage rate when the market is full of funds as during the 2009 - mid 2013 when Malaysia is the favorite destination (the 2nd most popular in Asia) for foreigner funds to park their monies particularly in our bonds markets (both public and private), and stock market to a lesser extend.

Or we will pay higher rate (easily over 5%) during credit squeeze period when event like our bonds market facing selling pressure as what is taking place currently happens. Other factors: lower deposit (people save less either bcoz have better opportunity to invest or needs require to spend amid inflation or currency depreciation), outflow of fund from stock market, etc. The variables is quite large.

All the best and good luck to over gearing borrowers. You really need to prepare for the days of extra interests payment due to the rise of rate. The trigger factors for higher borrowing cost are almost ready in place now.

As a consumer, when sign up for a loan agreement, it fixed 1 thing, which is the X% BLR -/+X% or BR +X%

Upon the time of loan offer, the effective landing rate look the same.

1. About impact on BLR
Before BR take effective
BNM decide the BLR, your agreement fixed X%
After BR take effective, does BNM still decide BLR or bank can decide base on BR calculation?

e.g. BLR 6.85 - 2.4%, so is BLR still same in future for all bank or each have different BLR?

The obvious of this question is does it matters which bank i get my loan from as long as the offered -2.4% is the best rate i get?

2. For BR rate
BR rate is base on banks performance, but you loan agreement only fixed on the margin %.
If i got an offer from HSBC 3.9+0.65%, MBB 3.2+1.3%
In a long run, if HSBC able to increase cost effective become 3.5+0.65% (since 0.65% is fixed)
and if MBB not doing well, example it become 3.5+1.3%?

At this point of time, they might able to offer new loan rate e.g. both also 3.5+1%

But for those who already signed the agreement, isn't their fate is tied to the performance of the bank for the rest of the tenure?

I meant the blr 6.85% as off every bank refering the same rate? not the after offer rate

Since many years back, the banks are given the discretion to set their BLR. Whenever the bank changes the BR, the BLR must be revised accordingly by the same magnitude. So, if you still have a BLR-loan offer and a BR-loan offer, and if both offering the same effective lending rate, there is no difference either you take BLR- or BR-loan.

How the bank sets the BR is not really based on bank's performance. BR is determined by 2 main parameters, i.e. the benchmark cost of fund and the SRR. Most (90%) banks used the 3 month Klibor as the benchmark cost of fund.

Jason, if you dont mind me asking ya.. you seem to know the intricacies of how the bank works. Do you work for the bank or any financial institutions on the corporate levels?

Hehe... you are sensitive
But you are right I cari makan in FI

Technically it is different. But practically toward consumer , it will be similar as consumer , we also only more focus on the effective rate.

There are many questions about the BR whether would it be replacing BLR for mortgage loan.. People are confused with BR and BLR... I can't get a better understanding on this. Will BR affect my plan to buy a new property in future? Is BR good or bad for the economy?

I think what you asked have been mostly, if not all, answered in this thread. Please refer to the earlier posts.

Alright.. Thanks a lot!

It's not an option. From 2/1 onwards, all mortgage loan application are to be priced under BR. Some consumer products which are revolving in nature and approved prior to 2/1 (hence BLR-based) will need to be changed to BR in their coming review by the bank.

Existing BLR-based mortgage loan will remain as it is. Revolving credit facilities like personal overdraft will be changed to BR (if it was BLR) during the review.