Bank Negara Malaysia raised the Overnight Policy Rate (OPR) by 25 basis points to 3% since last Friday. Following this, banks will increase the Base Lending Rate (BLR) sooner. So, for those who have variable loans especially housing loan will have to pay more in their monthly installment.
The reason for increasing the OPR is to cover the local inflationary pressures. The current inflation rate is about 2.9% and it is expected to continue to rise in latter part of the year. However, Bank Negara did a great job as they take pre-emptive action to push for economic growth before addressing the inflation issue.
Fixed deposit has been seen as a lower return saving vehicles. But, it is low in risk and high in liquidity as well. In current situation where interest rates are expected to go up, people may start to question how long they should place their money in the FD account.
Based on my personal calculation, it’s better to place your FD in a shorter tenure so that you can take advantage of the expected interest rate rise in future. I still remember in the mid of May, Bank Negara Malaysia revised its Overnight Policy Rate (OPR) by 25bps to 2.5%. You can try to put your fixed deposit in a shorter tenure such as 1 month, 2 months or 3 months. This is because if you put in a longer tenure now and you can gain an extra 25bp from it, but you won’t profit from it if the rate rise by another 50bp in a couple of months perhaps.
Effective from 18th May 2010, the latest Base Lending Rate (BLR) for most banks in Malaysia will be at 6.05% per annum. Therefore, the BLR increased another 2.5% from 5.80% previously. This adjustment is made based on Bank Negara announcement to raise the overnight policy rate (OPR) by 25 points on 13th May 2010!
For me, Malaysia has a very high base lending rate, but this also means that our interest earned on fixed deposits is also quite high. From positive point of view, the BLR increase is a sign that our economy is recovering. However, I can feel that the core parts of Malaysia still very bad as unemployment, low salaries are some of the major issues facing by Malaysians nowadays.
So, with the latest increase of BLR in Malaysia, for sure it will further hurt Malaysians who is going to get new home.
These are the local and foreign banks latest BLR rate in our country: