Base Lending Rate (BLR)

When you have decided to buy a property, most of you are rushing to look for a best deal of property loan packages to see which one suit you and save the most. In the market, there are plenty of home loan packages offer by all banks, some of them are Fixed rate or Term loan or Flexible mortgage..etc. Offers are keep changing from time to time.

Usually, you will notice that most of the packages in the market are offering BLR +/-of certain percentage (%). i believe most of the property buyer will have doubt on what is this BLR.

Base Lending Rate (BLR) is a minimum interest rate calculated by financial institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.

http://www.bankinginfo.com.my/index.php?ch=12&pg=26&ac=600#

The Interest Rate is computated from a complicated formula udner the control of bank malaysia. BLR is fixed and standardised in all banks. We can easily obtain the current BLR rate through any bank. For e.g. today 15th september 2006, BLR is 6.75%.

The BLR is a fluctuation rate. In other word, whatsoever loan packages under BLR +/-,is kind of rate that subject to market fluctuation. Therefore, some people would rather to choose fixed rate (normally is higher compare to others) because borrower can forecast their cash flow more accurately.

In fact, the selection of loan packages is preferably to include the possibility of fluctuation gap. It is to form a buffer to anticipate the increase of BLR. For short term loan, the risk of the fluctuation will be lesser compare to long term loan.

Honestly evaluate your own capability and the risk that you can absord, so it can help to select a better loan package to avoid ad hoc situation in future.