News & Articles No change to loan interest with base rate replacing BLR

No change to loan interest with base rate replacing BLR


5 Dec 2014
No change to loan interest with base rate replacing BLR
KUALA LUMPUR, Dec 5:
While banks in Malaysia are moving away from the base lending rate (BLR) system from January next year, customers with existing loans or applying for new ones won't be affected.
This was confirmed by a Bank Negara Malaysia (BNM) representative today, who explained that the change is to perception on how the bank interest is charged.
For example, while many banks today may tout mortgage offers to be at "BLR-2%", this will later change to the new base rate plus the margin set by the bank.
To illustrate, if the BLR is now at 6%, the "BLR-2%" offer means the customer pays 4% on the mortgage. With the new system, the bank will have to reveal its base rate - say 3% - and also disclose that its margin is 1%.
Ultimately, while the new interest is presented as "base rate + 1%", the effective rate paid charged on the customer's mortgage remains the same at 4%.

The change in the way banks calculate the interest rate, taking effect from Jan 2, was announced by BNM on March 19 this year "to provide a more transparent reference rate to enable better decision by consumers in making choices among the many loan products offered by financial institutions".
However, a mobile text message being circulated on the above seems to have got its facts confused - claiming instead that banks will charge interest rate of "BLR +0%" and higher.
The text also claimed that the last day for submission of applications to qualify for the "BLR minus" rates would be Dec 19 - but this was rubbished by the BNM representative as being wholly untrue.
The BNM representative also said illustrations with examples will be issued soon by the various banks to customers to better explain how the new interest calculation would be done.

Source: The Rakyat Post

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