New Bank BLR Rate

Hi all, as mentioned in previous entry, BLR has increased by 0.3% just recently right? Let me share with you some history on increase of this BLR as below:

Quite frequent isn't it for 2010? Would history repeat itself again this coming July?

 Now, am sharing with you the latest bank BLR Rates for your reference:

 *Source: horlic

BLR Increased by 0.3%

I shared with you in previous post here that BLR (Base Lending Rate) is expected to be increased right? Well, it already has actually..from 6.3% to 6.6%, an increase of 0.3% that is..

Have you ever wonder why banks increase the BLR and BFR (Base Financing Rates)? I did..and as usual my other half explained it to me..let me share with you what I figured out..

To start with, rise in BLR and BFR is in response to increase in Overnight Policy Rate (OPR) by Bank Negara Malaysia (BNM). Increase in OPR is normally on 25 basis points, and this time it increase from 2.75 to 3.00 on last 5 May 2011.

Why BNM increase the OPR? BNM cannot simply raise the OPR just like that, without taking into consideration few factors. Among other reasons is ue to forecast of better economy growth despite Tsunami in Japan and continued economic slowdown in US and Europe.

So, what is the consequence of increase in OPR? Obviously, the increase in OPR contributes to increase in inflation rate. Inflation is already expected to increase further due to higher food prices & fuel cost. You guys are aware right that sugar price increased just recently, not to mention the fuel price increased few times already for this year alone..According to most analysts, there might be another round of OPR increase expected in the second half of the year.


As a result, banks start to increase the BLR & BFR a week after. The increase is 0.05% higher than the OPR which would be positive to the Banks earnings.

How does the increase in BLR have any impact on us? How much? Let’s do some calculation..:D

Sample on the impact

Let me take the same example as before..say your housing loan is RM 400,000..

1. Current Interest rate : BLR – 2.3 = 6.3 – 2.3 = 4.0%

2. New Interest rate : BLR – 2.3 = 6.6 – 2.3 = 4.3%

From the table above, you can see an increase around RM 70 per month which would result in RM 840 per year & RM 25,200 for 30 years.

Perhaps we can say that the impact would be minimal?



Case Example of Home Loan Refinancing

Hi folks..sorry for taking quite some time to continue my previous entry..well things came out that I got to postpone my intention to continue writing.

So lets go straight to the point..last time I promised to share with you case example of each reasons for refinancing right? Here we go..

 

Lets make a reference on the following:

     Your current housing loan is fixed at RM 400,000

             Loan tenure of 30 years
            Your current loan interest rate is BLR + 0.5 = 6.3 + 0.5 = 6.8%
            Your refinance interest rate is BLR – 2.3 = 6.3 – 2.3 = 4%

Case example 1: Maintain monthly payment will result in reduce of loan tenure

 

With the lower interest rate, you can actually reduce loan tenure from 30 years to only 18 years by maintaining the same monthly payment to the bank.  Let’s see the calculation I made below: 

Now what does it mean? It means,  saving of 12 years loan tenure by maintaining the same monthly payment easily can save RM 2,600 x 12 months x 12 years = RM 374,400!

 

Case example 2: Maintain loan tenure will result in lower monthly payment

With the lower interest rate, you can actually reduce your monthly payment from RM 2,600 to RM 1,900 by having the same period on loan tenure. Let’s see the calculation I made below:

Now, what does it mean? It means that..you are saving RM700 monthly, and that my friend also means that you can afford to purchase another medium cost apartment for rental purposes which turn to be an additional income for you!

 

Case example 3: Maintain monthly payment & loan tenure will result in excess cash

With the lower interest rate, you can have up to RM146, 000 excess in cash by refinancing with the same monthly payment & loan tenure. Let’s see the calculation I made below:

Now, do I need to elaborate in details on the usage of the money? ;).

So folks, in any scenario, refinancing is the best option that we have. What are you waiting for?

3 Main Reasons for Home Loan Refinancing

Previously, I wondered why people do refinancing of their home. Doesn’t it mean they are actually delaying the tenure of your debt? Or in other words you are raising your owing money from the bankers? Yup, was that short minded and totally discourage to proceed with refinancing with this belief, but that change after my other half explain to me what that means..

I understand that...

Refinancing of your current housing loans means you are taking advantage on the current lower finance charges compared to the one you are having.

Looking back at the history, over the last 5 years, average loan interest was BLR + 0.5%. Currently, most of the Malaysian Bank is offering as low as BLR/BFR – 2.3%. Current BLR stood at 6.3% and mind you it is predicted to be revised upwards very soon. I guess before it does happen, grab the opportunity of the current low interest rates for the following reasons:

1.       To maintain monthly payment  that will results in reduced of loan tenure

2.       To maintain loan tenure that will result in lower monthly payment

3.       To maintain monthly payment and loan tenure that will result in excess cash

Still don’t see how the above is at your preferences? I’ll share with you case example  of each so you could see the differences before and after the refinancing..