BASE RATE ( BR) AND INDICATIVE EFFECTIVE LENDING RATES OF FINANCIAL INSTITUTIONS

/, Latest News and Update/BASE RATE ( BR) AND INDICATIVE EFFECTIVE LENDING RATES OF FINANCIAL INSTITUTIONS

BASE RATE ( BR) AND INDICATIVE EFFECTIVE LENDING RATES OF FINANCIAL INSTITUTIONS

BASE RATE ( BR) AND INDICATIVE EFFECTIVE LENDING RATES OF FINANCIAL INSTITUTIONS 2

With the new BR, which came into effect on January 2, 2015, interest rates are determined by the banks’ benchmark cost of funds and Statutory Reserve Requirement (SRR). Other components of loan pricing such as borrower credit risk, liquidity risk premium, operating costs and profit margin will be reflected in a spread in the new BR framework.

What is Base Rate?

The Base Rate will be determined by the financial institutions’ benchmark cost of funds and the Statutory Reserve Requirement (SRR). Other components of loan pricing such as borrower credit risk, liquidity risk premium, operating costs and profit margin will be reflected in a spread above the Base Rate. This increases the visibility of the factors underlying changes to the Base Rate.

The greater transparency, in turn, will enable more informed decision-making by consumers. Under this cost-plus structure, spreads will always be positive as it would not be possible for financial institutions to offer lending rates below the reference rate.

Financial institutions will be given the flexibility to determine their respective benchmark rates. The expected strong link between the Base Rate, market interest rates and the Overnight Policy Rate (OPR) will facilitate more complete adjustments to retail loan repayments when market interest rates adjust to increase or decrease in the OPR.

The Base Rate will be used for new retail floating rate loans and the refinancing of existing loans extended from 2 January 2015 onwards. After the effective date, BLR-based loans prior to 2015 will continue to be referenced against the BLR. However, when a financial institution makes any adjustments to the Base Rate, a corresponding adjustment to the BLR will also be made. As such, financial institutions would be required to display both their Base Rate and BLR at all branches and websites.

 

Want to know more? Call Us Today!

Malaysia Housing Loan Contact Us

By | 2016-11-01T10:46:03+00:00 March 14th, 2016|Home Loan Library, Latest News and Update|0 Comments

About the Author:

Hey guys, thank you for coming here and check out our website. We have been doing this housing loan loan services more than a decade and i truIy feel old already. Our website is updated frequently. You can always find us at google+ or our youtube channel http://www.youtube.com/user/malaysiahousingloan. Along the years, we helped thousands of people with their home loan. Sometimes we felt our works is worthy because we help many people to get their dream house. Please come and engage our services. We promise to guide you through and be there when you need us. Until next time, Good Luck!

Leave A Comment