some say is safe to take fixed rate?? fixed rate is it the spread of the bank??

For fixed rate loan, you don't need to worry the upside risk, ie hike in BR/BLR as the rate remains fixed throughout the loan tenure.  Fixed rate is not the spread of the bank (if it is under the context of "BR+spread" that you mean).  However, if the BR/BLR goes down, you will not enjoy the benefits of lower effective lending rate then.

Fixed rate loan is generally higher than the prevailing effective lending rate as the bank that offers the fixed rate loan needs to cover the possible rise in cost of funds in the future given that it cannot pass it through to the borrower.

thx for your explanation, means fixed rate is higher and better if BR goes higher than that right?

If given both identical offer from two banks, one at BLR-2.4 (BLR=6.85) and one at BR+1.25 (BR=3.2); summing to effective rate 4.45%.

Which is the better choice? Although both have the same rate now, but it's the uncertainty in the future that worries me. If suddenly bank B's BR is raised and to be the same average of other banks (roughly 3.8), I'll definitely be in disadvantaged position here....

Hmmm.. since Base Rate is so new to us, why not we wait and see how it goes... Till now I believe we need to observe more and what people says about Base Rate for property or mortgage loan before making up any decisions.

Hi Elmer, effective from 2 Jan 2015, the Base Rate (BR) replaced the Base Lending Rate (BLR) as the main reference rate for new retail floating rate loans. The Base Rate will be determined by the financial institutions benchmark cost of funds and the Statutory Reserve Requirement (SRR). Other components of loan pricing such as borrower credit risk, liquidity risk premium, operating costs and profit margin will be reflected in a spread above the Base Rate.

The Base Rate will be used for new retail floating rate loans and the refinancing of existing loans extended from 2 January 2015 onwards. After the effective date, BLR-based loans prior to 2015 will continue to be referenced against the BLR. However, when a financial institution makes any adjustments to the Base Rate, a corresponding adjustment to the BLR will also be made. As such, financial institutions would be required to display both their Base Rate and BLR at all branches and websites.

Other than this, the BR is referenced against KLIBOR. It will probably be revised once every 3 months. This make it a bit more difficult to predict customer's monthly installment although it's unlikely that changes will be too drastic. So, the Base Rate (BR) will change and there will be changes on Base Lending Rate (BLR) as well.

You may refer to below link to get more details on Base Rate and Base Lending Rate (BLR).

https://www.imoney.my/articles/all-about-th...-base-rate-work

Same question asked earlier and my answer is no difference either you take the BR-based or BLR-based loan for your scenario. Further explanation you may refer to the earlier post.

I see.. but is there chances where only Bank B's BR is raised (i.e. from existing BR3.20 to BR4.0) where other bank's BR maintains the same?

If that is the case, wouldn't taking Bank A's loan offer of BLR-2.4 (eff. 4.45%) better choice? Since if Bank B determines their BR is now 4.0 instead of 3.2, BR+1.2% will end up as eff. 5.2% than eff. 4.45%; where Bank A's BLR is not affected at all as their BR remains the same.

My apologies. Your scenario involves 2 banks which I have mistaken it as same bank with 2 offers (some applicant got the offer last year end, so is still BLR-based).

When the bank, be it Bank A or Bank B revises its BR, the BLR has to be adjusted by the same quantum.  You are worried Bank B will raise the BR/BLR and assume Bank A will keep its BR/BLR unchanged.  But the opposite can happen too, ie Bank A raises the BR/BLR but Bank B maintain the rate.  So, you basically have the same risk here as either Bank A or Bank B can also raise the rate.

Nevertheless, if both BR-based loan or BLR-based loan offers come from the same bank, then it is indifferent whichever offer you choose.

Hope the above clarify.

When the bank, be it Bank A or Bank B revises its BR, the BLR has to be adjusted by the same quantum. 

In this situation, when a BANK A adjusts its BR up by 20 basis points, does that mean their BLR will also be adjusted by 20 basis points?

If yes, does this also mean that in the near future, the BLR rates will not be uniform between one bank and another? BANK A, due to increasing its BR by 20 basis points, also has to increase its BLR by 20 basis poinst, as such its BLR is now 7.05%; while BANK B which has not increased its BR, still has the BLR of 6.85%

I understand that the BLR can move independently between one bank to another (AL Rajhi's BLR was higher than the competition back then), but it has been uniform for most major banks in Malaysia (Starting from the top: MBB, CIMB, PBB,~~~ all at 6.6% and now 6.85%)

Is this situation possible? Sorry if I am asking the same questions that was covered earlier, I just got back and everything moving so fast.

But although I will be exposed to risks with either of the bank, wouldn't Bank B's impact being greater than Bank A, in my example above?

Since if bank A increases their BR/BLR; the spread (or in my example, the negative rate below BLR) is not too huge as compared to; if bank B increases their BR/BLR; due to the "already-high" spread, it'll have greater impact if that happens.

In your scenario,
Bank A: BLR-2.40% (BLR=6.85%)
Bank B: BR+1.25% (BR=3.20%)

Please note that,
- Both at present yield the same effective rate: 4.45%
- the spread, ie 2.40% (Bank A) or 1.25% (Bank B) needs to be maintained over the whole loan tenure.

If OPR increases by 0.25%,
- if both Bank A and Bank B increases the rate by same quantum in their respective BLR and BR, the effective lending rate will also be increased by 0.25% to 4.70%.
- if only Bank A increases the rate (by same quantum) and Bank B maintains its rate, effective lending rate will rise to 4.70% for loan obtained from Bank A whereas effective rate for Bank B's loan remain unchanged at 4.45%.
- if only Bank B increases the rate (by same quantum) and Bank A maintains its rate, effective lending rate will rise to 4.70% for loan obtained from Bank B whereas effective rate for Bank A's loan remain unchanged at 4.45%.

Is the picture clearer?

  That clears up my confusion!! Basically BR/BLR will be changed whenever there's a change in OPR, as bank "needs" to maintain their profit at the same ratio. So either taking up BLR-2.4 (blr=6.85) or BR+1.2 (br=3.2) will expose myself to the same risk as everything is "at the bank's mercy", just different terms on the paper.

Thanks so much for your explanation.   

But pls do remember, since your scenario involves 2 diff banks, there is still risk there that the effective lending rate may differ in the future though there are the same now.  If both quotations come from the same bank, then no such issue.

Good luck 

But this is not because of BLR/BR, but more on "bank's mercy" to decide whether if they "want" to increase or "want" to stay-still, right?

Regardless of BR/BLR, if bank decides to increase, it will have the same quantum effect as they'll need to maintain their spread (for both BLR/BR cases), right?

Thanks again!

  That clears up my confusion!! Basically BR/BLR will be changed whenever there's a change in OPR, as bank "needs" to maintain their profit at the same ratio. So either taking up BLR-2.4 (blr=6.85) or BR+1.2 (br=3.2) will expose myself to the same risk as everything is "at the bank's mercy", just different terms on the paper.

Thanks so much for your explanation.