WIll BLR in future increase from 6.75% or lower?

Since the economy is slowing down, will the BLR increase? But mention that malaysia can sustain the down fall with alot of excess. Rumors and talking, just wait and see how.

if the BLR increase will it hurt consumers. have to pay more interest for those loans taken up and to what percentage. will it increase to as high as 12% as history recorded. when it goes up can see alot of people selling houses/car which cannot sustain the interest on the loan. property market will go down bcos too many already in market over produce. a glut in fact eg like shopping komplexes here and there. a lot of it vacant due to expensive rental etc

Will the BLR go down?

As a lot of hidden bad debt have not rise yet due to indirectly coverup eg like subprime issue, stock market,recession begin, consumer product increase,oil price going up etc. is that a good sign.

in time will see how long can it sustain.


what do u think?

I don't know whether it will go up or down but one things I do know that a economic slowdown will not push up BLR. Actually it is the exact opposite and you've already pointed out the fact. The US credit crisis has forces the (US) central bank to lower interest rates to spur growth.

And I do think we have quite a brilliant central bank governor on our side, and it has several times in the past pointed out that whether BLR were to increase or decrease will depends on inflation being cost pushed or demand pulled since inflation and economic growth is often closely corelated in financial theories. If it's cost pushed, then increasing BLR to contain inflation will do more harm than good since prices will be going up regardless of BLR and the further increase in BLR will only only constrain growth. However, if it is demand pulled, then increasing BLR might be a good means to contain inflation and growth will not be too much affected.

Unless the present condition, inflation pressure is more cost pushed factor and it is my opinion that BLR will stay in the near future.

if BLR rate is going down..then it will beneficial to all of property buyer...i oso hope that it can break record until go to the lowest then i no need to pay so much interest rate for my future property investment,...but this is controlled by central bank..we cant do anything on it...

i scare that even if the BLR rate is going down, but the discount interest rate that is given by bank is low too, then this may not make any diffrent for buyer oso...currently, the standard interest rate offred by bank normally -1.4% to -1.7%....

now is -1.9 and -2

it depends.....
lower also got....
see how much is the property cost lor...
most probably BLR will go down...this is what i heard lar..donno true or not....

all the while i heard is the blr will be up in near future...
you are the 1st 1 which i heard that blr will be go down
i also hopes that it will be going down...

i'm looking for home loan also, now still consider whether to go for fixed home loan or blr minus package

anybody mind 2 advice?

Legiwei,

Well said. I agreed with you. Our inflation issue is kept in check, I too dont' see the reason for our BN to increase the BLR.

anything can happen. hope it will not go up to 8-12% as history recorded.

everything is increasing from day to day, dont see why there will be no revise of BLR in time to come

When recession comes BLR will shoot up. Its time to repackage your mortgages

I am confused here. Pls correct me if i am wrong.

The BLR is fixed at 6.25 by the Bank Negara. and the banks such as citybank or HSBC is offering 6.25 -1.5 to 1.7 is depend on the bank package to attract customers. Therefore it is the bank interest rate that fluctuates not BLR.

Correction. BLR is 6.75. And you are right in the sense that loan packages are offered by banks. However, when the package states BLR - 1.7% for instance, the BLR is NOT FIXED. For the current rate, BLR - 1.7 = 5.05%. However, if Bank Negara decides to revise the BLR (most probably upwards) then your effective rate will be affected as well.

BLR is fixed at a ceiling level by BNM, currently 6.75%, yes correct. But the fixed rate can be changed from time to time by BNM depended on economy situation. Just for the last 2-3 years, economy is not moving in either direction, so the BLR is being left at 6.75% for this period of time but it doesn't mean future BLR will be the same especially current economy condition and inflation situation will have big impact on the macro-economy side.

So BLR is not fixed but fixed at a ceiling by BNM and can be reviewed from time to time, normally when BNM hold meeting, (about a month plus for every meeting interval), only when there is emergency situation, then BNM will act accordingly which is same across various countries central bank or Fed Reserves.

I hope my explainatin is clear enough.

This post has been edited by cherroy: Jun 10 2008, 09:36 PM

In your personal opinion, do you think BLR will go up or down cherroy? And by how much?

BLR is now up to the Banks to decide their own BLR. Since all Bankers is a member of ABM, it is normally decided at 6.75% p.a.

BNM only monitors Overnight Policy Rate which is fixed at 3 point something as means to control the borrowing costs.

BLR low is good for those who borrow monies and not for the retirees/pensioneers or those savers as their FD Rate return is peanuts.

Yes, I can 100% confirm BLR will go up in the future.

But the question is when or how soon and how high can it go?

Reason being is that most people would not be able to enjoy the benefits when the rates are declining after a spike as they most probably would have implode financially.

Short term wise its a bet, but in the long term its a definite.

"BLR as the chart indicates has spiked to almost 13% twice in the last 25 years (coincidentally the favorite tenure of loans) with the most marked increase being in January 1995 from a base of 6.6%, to a high of 12.27% in June 1998."

Quoted from the article below, a good read for those interested.
http://www.money3.com.my/MalaysiaHomeLoanM...dRateLoans.aspx

This post has been edited by Zarth: Jun 10 2008, 10:26 PM

All,

1) IMHO, BLR will either stay the same or goes up. It will NOT go down. BLR is at the HISTORIC LOW now. So, it cannot go down.

So, how to determine whether BLR will stay or goes up: liquidity aka supply and demand of money.

A) Now, the bank has a lot of money sitting in the bank. So, the supply of money is high. But, if the RM keep going down versus USD, people may move the money out of Malaysia. So, BNM may need to raise the discount rate to keep money inside Malaysia. Then, BLR will go up.

B) Demand for money. If USA is going into recession and Malaysia is going into recession, nobody will be expanding their business. Hence, the demand of money is going down. If the demand of money is going down, how does that affect BLR?? And, lower BLR will not spur demand anyhow since people are out of job??

Watch (A) and (B) for your answers.

Dreamer

personally speaking, as one who did not delve any deeper into international finance than the macroecon level, should not the reduction in gov spending allow the bank some space to reduce rates? to be sure, this is counter-acted by the inflationary effects of oil, yet with governemnt spending, as well as public spending lower nowadays, and seeing that there is going to be a freeze on new gov projects, surely public savings is up which in turn allow banks to offer cheaper rates to spur growth?

and in contrast with what dreamer opines, if we have a large amount of savings despite the low rates, then it means that its quite inelastic, then. if we lower it further, it won't move by much, stands to reason. furthermore, i see nothing wrong with national money going out. any earnings from that money invested outside that is thus repatriated counts into the intangible exports section of the national accounts.

i am a bit confused, though. what do you refer to by 'demand for money'? is it money demand, as in the economic sense where it is the amount of currency one wishes to hold in proportion to savings, or money demand in terms of something else? this is because, in times of recessions, with the uncertainty of banks, money demand goes up, as in more money is in the hands of the public.

of course, it is all a muddle to me, currently. (drunk again, barbecue.).

The high supply of money has caused FD rate stay at historical low. Why? because since 1998 crisis, domestic demand has slumped and not recover well, while export is good because of cheaper RM, so trade surplus is building every year, every month, so money become plenty.
But with less investment opportunites around (businesses expansion, investment like stock market), those cash is just sitting in the banks doing not many things. You can esee those well managed company, mostly are high in cash level, which also a lot of well managed listed company give windfall special dividend from time to time because those cash has not much opportunites being used.

Gov spending is not reduced, don't be misled by this few days newspapers headline, those reduction is just tiny portion to make newspaper headlines, insignificant.
In fact, if gov spending is really reduced and slightly thrifty (like don't buy a Rm200 screw drive set) then gov won't have budget deficit of more than 3% of total GDP.

Also, although Malaysia ecoonomy is highly depended on gov (as 1 millions + workforce is in gov servant), still gov spending is not the entire picture, private sector is the one main driving force of the economy.

Another point is that reduction in gov spending has no direct relationship with money supply.

Actually we have negative interest rate at the moment as inflation rate > FD interest rate.

This post has been edited by cherroy: Jun 11 2008, 11:34 AM

this is true.

i do understand that fiscal policies do not have much to do with monetray policies; i was just mentioning the possibility of the gov taking on an expansionary fiscal pol. what with the high savings and low money demand despite the low rates, especially so given the para-demiurgical nature of the gov. i figure we just have to bear with the inflation for the moment.

on an aside, has the money supply increased much these past few years?

personally, i have never been able to grasp how people not dissave when rates are low. a little unreasonable in my mind, plus it muddles up the estimates.