I hope you won't mind if I speak frankly?

This is flawed logic.

By this equation, that means the BNM's duty is to clear the property overhang in the market?

Property developers over-produce houses, e.g. say they built 3 houses for every 1 family in the country, and the government (via BNM) pushes loan price down to encourage people to buy the housing assets?

In this case, BNM is working for property developers

What should happen is that house prices will fall / decline so that demand will clear supply.

If BNM were to push for lower rates to spur house purchases, what do you think will happen? Yes, after the houses clear, the property developers will produce even more houses

That's why a properly functioning price mechanism is important in every single market to act as a market-clearing mechanism.

I love Economics. It rulez!

While I have been an advocate of raising the BLR to combat inflation, I saw a fascinating article the other day in The Edge.

You see, there are 2 types of inflation: Demand-pull inflation and cost-push inflation.

In demand-pull inflation, rising demand in excess of supply causes prices to go up. To cool off demand, interest rate rises (as a monetary policy tool) helps slow consumer & business loan growth, thus reining in inflation (but also economic growth).

In cost-push inflation, it's the increase in raw material prices in the supply side, which is causing prices to go up (demand is constant).

Different situation. I am still mulling my thoughts on it. But read The Edge!

Our BLR is already near historic lows. Doubtful I'd see it go lower.

The question at the moment is really stay or rise.

Our economy is not in a deflationary state, and even if we end up in a recession, we could probably use other policy tools to kickstart the economy rather than feeding in more cheap capital...

... i'd probably say that our economy would do much better if we could allocate capital more efficiently to productive projects, rather than making capital even cheaper.

The cheaper capital becomes, the lower the returns we tolerate on our investments.

For those among you who may be more speculative / trading-minded.

There is one certainty whenever BNM holds interest rates constant in the face of widespread expectation of a rise in interest rates.

Regardless of BNM's arguments behind it (which I am sure they are sound), that kind of maneuver will weaken the ringgit as the inflationary expectations will feed back in.

I haven't seen the ringgit trading since the BNM announcement, but I wouldn't be surprised for it to head that way.

bank muamalat BLR is 6.80% now..i'll be checking on others later next week.

at d same time a lot of houses and even expensive cars has been repossessed lately, ask a few of your banker frens on auction mega sales . Government didn't accurately announce the real inflation rate yet and this has put foreign investors in uncertainty.

Haizz.. i hope the BLR would remain if it can't be reduced..
And increment would put more plp in heavier debt.. even is minor o.5 increment will kill a lot of plp..

this is the age of record breaking.. historic low will be occurring more often than 20 years ago..

That's why it is very important to control spending. Don't buy things that you can't really afford just because loans are easily available. Once the interest starts to rise, you will be in trouble.

i beg for my lack of knowledge, but the current BLR rate is 6.75(2008)? normally I always see bank housing loan adds of BLR - 1.2% etc.......(highest i saw eon bank blr - 2.3%, donno true or not) so basically, it would be somewhere around 4.4%-5% of annual interest (calculate from balance of loan or sum of loan? )a slight increase of 1% would be very much

so lets do a simple math :

sum of loan : 200, 000k
years of repayment : 30years
interest : BLR-(bank discount 1-2%)
eg:6.75 - 1.55 = 5.2%
monthly payment =RM1,098.22

http://www.ambg.com.my/personal/financialt...mefinancing.asp

any comments?

This post has been edited by pilotHans: Oct 21 2008, 01:37 PM

BLR in the US already decrease

hopefully we will follow soon

src:
http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1724
http://biz.thestar.com.my/news/story.asp?f...29&sec=business

if OPR goes down BLR goes down, right?

How much will BLR go down then? BLR is controlled by the banks right?

how about other FD/Savings interest rates? will those go down as well?

p/s: i know im asking noob Q, im not from economic background .

Yes & Yes.

But FD rate has not much room for the downside, especially one year is fixed at 3.7% which BNM required banks to do so as previous they stated, unless they change the policy again.

Hm..finally they made a rate cut. But a little bit too late i believe.

hm...i think one should not confused with OPR, Bank Rate (interest rate), and BLR. Even if there's a rate cut, it doesnt necessarily means BLR will go down proportionally. At times, it might be reciprocal.

CIMB Bank lowers lending rates

KUALA LUMPUR: CIMB Bank Bhd and CIMB Islamic Bank Bhd will reduce their base lending rate (BLR) and base financing rate (BFR) by 25 basis points to 6.5% respectively with effect from Dec 1

URL: http://biz.thestar.com.my/news/story.asp?f...01&sec=business

hehehehe, lets see which will win :

1. BNM stimulus via cheaper OPR
2. Consumer fear

I am all for the consumer

hurry put more $$ into the FD before the bank renew downwards their FD rate

Woh, some lucky chap actually has $$$ to put aside ......