BLR going down?

Bank Negara has announced to cut on the benchmark Overnight Policy Rate (OPR) by 25 basis points (bps) to 3.25%. This is expected to give a good news to property investors but bad news to fixed deposit income earners. BLR is expected to go down from the current 6.75% to 6.5%, a very good news to property investors. This will lessen the monthly loan payment and the total repayment amount, depending on the home loan package they applied. This is contradict to rumors spread from the mid of year that the BLR will likely to increase to 8%.. makes lay people fear to buy any property. If you hold a fixed rate home loan, this news do not bother you at all.

But, unfortunate situation for fixed deposit income earners. The FD rate is expected to be lower too.. makes the income earned from the interest of the deposit lesser than below. Hm.. for bumi, we have another choice.. put your money to the ASB which provides a much higher profit up to 9% per annum. We also have lots of PNB products to choose. But for non-bumi, they have a limited products, such as ASW. That is why everytime ASW sell their units, it is sold out very fast!

I would like to share with you an article from iProperty about the expected BLR rate. Enjoy the reading!

Cheaper loans
Bank Negara Malaysia announces positive cuts
Dec 10, 2008

Getting bank loans should become an easier and cheaper process following Bank Negara Malaysia’s announcement to cut a key benchmark rate, effective 1 December 2008.

Several banks have since
announced plans to lower rates for loans and financing, with some institutions calling up potential clients and offering loans over the phone.

Malayan Banking Bhd (Maybank), Maybank Islamic Bhd, CIMB Bank Bhd and CIMB Islamic Bank Bhd are among the banks that have announced revisions in their base lending and base financing rates to 6.5 per cent.

Datuk Seri Abdul Wahid Omar, group chief executive officer of Maybank, said the move would see borrowers benefiting immediately, as interest rates of all loans pegged to the bank’s BLR would be adjusted accordingly.

Datuk Seri Nazir Razak, chief executive of CIMB Group, believes that the move would help existing and potential borrowers deal with the sharply moderating economic growth.

Nazir Razak said in a statement that customers could also expect to pay lower rates for Islamic financing compared with conventional loans at CIMB Group.

Yeah Kim Leng, group chief economist of RAM Holdings Bhd, expects banks to lower interest rates for both loans and deposits. According to him, such an action would result in borrowers paying less to service their existing loans with floating rates, while individuals and businesses seeking to borrow from banks will find the cost of borrowing now lower.

The lower cost of borrowing or monthly repayments would encourage consumers and businesses to either spend or save more, depending on individual circumstances, said Yeah.

“On the flip side, deposit rates will also decline, meaning less interest income for savers. A cut in interest rate is a form of disincentive to save, thereby encouraging people to spend,” explained Yeah.

Higher overall spending would help industries and companies remain in business and not have to cut back on production and employment. Housing developers also stand to gain, with the rate cut encouraging more people to buy homes.

Datuk Ng Seing Liong, president of Real Estate and Housing Developers’ Association Malaysia (Rehda), said: “I am confident that the reduced rate will convince those who have been adopting a wait-and-see attitude to close the deal on their dream homes.”

Ng added that there should always be easy access to affordable financing for the housing sector, both for bridging and end financing, as the property sector has proven to help generate domestic growth during previous downturns.

Rehda has proposed for the central bank to set aside a dedicated financing quota for the housing sector and relax restrictive draw-down requirements.