Bank Negara raises key interest rate
PETALING JAYA: Bank Negara raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by 1 percentage point to 3%, a move that took most by surprise.
The OPR, the benchmark interest rate commercial banks use to calculate their base lending rates for loans, was last raised in July last year.
The central bank hiked the SRR by 100 basis points to 3% effective May 16 as a pre-emptive measure following the build-up of liquidity in the financial system.
“With the economy firmly on a steady growth path, the monetary policy committee decided to adjust the degree of monetary accommodation,” said the central bank in a statement yesterday.
“At the current OPR level, the stance of monetary policy remains supportive of growth. The future stance of monetary policy will depend on the assessment of the risk to growth and inflation prospects.”
Bank Negara acknowledged inflation, which has increased globally on account of higher energy and food prices, has inched up too in Malaysia and has now hit 3% in March to average 2.8% for the first quarter of 2011.
“Global commodity and energy prices are projected to remain elevated during the year, with inflation in major trading partners also expected to rise further. There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year,” the central bank said.
However, it noted that despite higher inflationary pressure, latest indicators pointed towards continued strengthening of private investment and sustained private consumption expenditure in the first quarter.
“Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption, while private investment is projected to strengthen amid the improved investment environment,” it added.
In a separate statement, the central bank said the decision to raise the SRR was undertaken as a pre-emptive measure to manage the significant build-up of liquidity, which could result in financial imbalances and create risks to financial stability.
Economists, who were divided over whether the OPR would be raised, told StarBiz that the central bank was sending out a message that inflation was now the concern instead of growth.
AmResearch Sdn Bhd senior economist Manokaran Mottain said policymakers were sending out the message that they were vigilant.
“They’re acknowledging that inflation is putting pressure on the economy,” he said, adding that market consensus was for the OPR to remain unchanged with a Bloomberg survey showing that seven out of 16 economists expected the hike, with the rest expecting the OPR to remain the same.
Nevertheless, economists agreed with the central bank that the rate hikes were still supportive of growth with domestic demand now the focus.
CIMB Investment Bank Bhd head of economics Lee Heng Guie said there was likely to be another 25-basis point hike in the OPR in July but this, judging from the language of the Monetary Policy Committee statement, “will depend on risks to growth and inflationary prospects”.
Meanwhile Affin Investment Bank Bhd economist Alan Tan said the decision to raise the OPR was “a close call” as a lot of brokers expected interest rates to remain unchanged due to the strengthening ringgit.
“Going forward, the central bank is signalling that rising inflation will be of concern and that growth will come from domestic demand as external demand weakens,” he said.
Tan expects another 25-basis point hike before year-end as the central bank moved in tandem with regional peers in normalising interest rates and managing capital flows.
“The normalisation of the rates is important because the US Federal Reserve has indicated that there may be a hike in rates next year and if policymakers here keep rates low for a prolonged period, there’s a risk of a capital outflow,” he said.
(TheStar)
No increase in bank rates seen
PETALING JAYA: Last month’s inflation, which rose to an almost two-year high on higher food and commodity prices, is not likely to prompt policymakers to raise the benchmark interest rates at next month’s monetary policy committee meeting on concerns over economic growth.
Instead, economists expect the statutory reserve requirement (SRR), currently at 2%, to be raised further while the overnight policy rate (OPR) is expected to be maintained at 2.75%.
The SRR is the amount of funds that commercial banks are required to keep with the central bank, interest-free, and is an instrument to manage liquidity.
»They will look at core inflation comprising the non-subsidised items and if prices continue to go up, then that would be a concern« ANTHONY DASSMIDF Amanah Investment Bank Bhd chief economist Anthony Dass expects Bank Negara to raise the SRR rather than the OPR as inflation, though on the rise, is “still at tolerable levels.”
He said policymakers would be cautious about raising the OPR too fast as this would compromise growth.
“They will look at core inflation comprising the non-subsidised items and if prices continue to go up, then that would be a concern,” Dass added.
He said in a report that Bank Negara was likely to raise the SRR by 100 basis points to 3% but maintained that the OPR would likely reach 3.25% by year-end.
Data released by the Statistics Department on Wednesday showed the consumer price index (CPI) for March increased by 3% to 102.4 compared with a year ago while for the first three months of the year, the CPI increased 2.8% compared with the previous corresponding period.
Much of the increase in the CPI was contributed by food and non-alcoholic beverages, and non-food items, which rose by 4.7% and 2.3% respectively from a year ago.
Other items which saw increases included transport (4.4%), housing, water, electricity, gas and other fuels (1.5%), alcoholic beverages and tobacco (6.4%), restaurants and hotels (5.1%) and health (2.5%).
Items in the CPI which saw a price decline were clothing and footwear (0.5%) and communication (0.3%). (TheStar)
A Careless Mistake…by a legal firm
I would like to share with you a recent case that I attended.
Mandy (not her real name), bought an apartment in Penang 3 months ago. She went to a bank and got her loan approved. The next step, she needs to engage a lawyer to represent her on the sale. She chooses my legal firm for the said transaction, but the banker told her that our firm is not listed as the Banks panel.
As this is her 1st house purchase she just follow the banker’s recommendation and use his chossen legal firm. Ironically, she did not check with me as my firm is in the ad-hoc panel of the bank and we have done many cases for them. So, why did the banker cheated her and told her we cannot do the loan documentation. Simple, a lot of legal firms offer kickbacks to bankers for reffering such cases.
The worst have yet to come. She signed all the legal documentation and the loan is due for release. What happen is that, the legal firm did not do a bankruptcy or ctos check on the Vendor. It turns out that the property is already in auction. Such a careless mictake. This should have been done on the very 1st step before execution of Sales & Purchase Agreement. At the end, the loan cannot be disbursed. Who is to be blame for this?
How I know about this case is because, Mandy just appointed our legal firm to handle her documentation as she has found a new apartment. I really pity her having to go through such an odeal. She in an innocent party.
From the Desk of
Michael Yeoh
To all of you out there, please make sure that you check throughly before listenning to anyone.
Be carefull on the fine prints when you buy Auction Properties
Michael Yeoh
OCBC Launches Ideal Mortgage
This type of loan does not follow the normal BLR but is determine but the Bank’s internal Mortgage Lending Rate (MLR). MLR is calculated from the bank’s cost of fund.
There are lots of advertisement on this new product. The interest rate as advertise is 2.5% fixed. Actually the rate is for the 1st year only (as usual marketing gimmick). Thereafter, the interest rate is calculated based on MLR – 1.3%.
Here are some pros and cons that I would like to share with all of you. I think this package is more suitable for borrowers who seek short term borrowing and minimum penalty for early exit.
Pros
a) Shorter lock in period (3years)
b) Low penalty for early exit at 2% on loan amount
c) Low cost of lending for the 1st year at 2.5% p/annum
d) Very suitable for investors
e) Current MLR is less than BLR
Cons
a) MLR is more volatile than BLR as it is determine daily.
From the Desk of
Michael Yeoh
Legal Fees Calculation for Buying a House in Malaysia
![law-day-2008-free-legal-workshop-jersey-city[1]](http://drmortgage.files.wordpress.com/2009/07/law-day-2008-free-legal-workshop-jersey-city1.jpg?w=115&h=150 "law-day-2008-free-legal-workshop-jersey-city[1]")
Whenever you purchase a house, you have to sign a Sales and Purchase Agreement with the owner of the property. You will have to pay for the legal fees and stamp duty in which the fees depends on the price of your purchase and also whether your property is with title or without title. The following I will share with you the formula in calculating the Legal fees:
The Legal Fees is broken up into 2 parts which is Professional Fees and Disbursement.
Professional Fees
Professional Fees is where the Legal Firm will charge you on the services provided.
(a) For the first RM150,000 – 1.0% (subject to a minimum fees of RM300)
(b) For the next RM850,000 – 0.7%
(c) For the next RM2,000,000 – 0.6%
(e) For the next RM2,500,000 – 0.4%
(f) More Than RM7,500,000 – Negotiable (but shall not exceed 0.4% )
Disbursement is where the bulk of your money is going to be spent.
Stamp Duty – 1st RM100,000 – 1%
RM100,000 above to RM500,000 – 2%
RM500,000 onwards – 3%
(c) Land value above RM50,000 to RM100,000 – RM125-00
(d) Land value above RM100,000 to RM200,000 – RM250-00
(e) Land value above RM200,000 to RM300,000 – RM375-00
(g) Land value above RM400,000 to RM500,000 – RM625-00
(i) Land value above RM600,000 to RM700,000 – RM875-00
(j) Land value above RM700,000 to RM800,000 – RM1,000-00
(k) Land value above RM800,000 to RM900,000 – RM1,125-00
(l) Land value above RM900,000 to RM1 million – RM1,250-0
10 tips before taking up a Home Loan?
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How much installment can I afford to pay every month?
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Should I take a lower tenure if I can afford to pay higher installement?
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Should I buy Mortgage Insurance from the Bank or Life Insurance?
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How many years is the Bank’s lock in period and how much is the penalty?
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Can I do extra Payment to my Loan?
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Do I have to inform the Bank if I were to make extra payment to my home loans?
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Should I take Non Free Legal Fees package of Free Legal Fees Package?
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Should I negotiate with the Bank for a lower interest rate?
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Should I take a Conventional Loan Package or Flexible Package?
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How much Loan am I eligible to take from the Bank?
From the desk of
Michael Yeoh
Be Carefull when You Choose your Home Loan
I would like to share with all of you a case I attended to last week. After going through with this customer, it strenghten my belief that choosing a suitable home loan and seeking help from professional mortgage planner is the right thing to do before buying a house.
My customer Mr Lim (not his real name) purchase a RM 590,000 house 3 years ago. At the time of purchase he went to a Local Bank to seek for financing. The Bank approved his loan of RM 480,000 but with a condition that he has to place a RM150,000 lien (bond) with the bank for 5 years. Mr Lim, without seeking any advise from other people thought that his loan cannot be approve because his income is not enough. Out of desperation, he agreed to place the lien.
Today, after 3 years of servicing his loan, his business is not doing very well and he needs extra money to sustain his business. Unfortunately, he is not allowed to withdraw the RM150,000 he placed with the bank. Now, he is faced with only 2 choices. He either has to refinance or to sell his house but both ways he has to pay a penalty of 5% on his loan amount which comes up to a whopping RM 24,000. After going through his case, refinancing is also not an option because he has not been paying his loan for the last few months and the Bank’s lawyer has also written to him. At the end of the day, he is forced to sell in order to recover his money and also the RM150,000 lien with the Bank.
If Mr Lim has gone to seek professional help during his purchase, he might not have to place the RM150,000 lien and the penalty will not be so high. Averagely, Banks are charging 3% in penalty. It’s sad that he has to go through this ordeal during this point of time.
For those who are seeking to buy or refinance your home and if you are not sure on your financing please seek professional help. Taking a Home Loan needs proper planing as this is your biggest commitment and will affect your future planning.
From the Desk of
Michael Yeoh RFC (USA), BCOM (AUST)
Personal Loans – How Interest is calculated?
- a) Interest Rate is Fixed for the whole tenure
- b) Future Interest is calculated. If you take 5 years tenure you will have to pay the interest for 5 years even though if you can payoff earlier in one lump sum. Certain Banks give rebates for early settlement.
- c) Monthly installment is higher because of shorter tenure.
- d) No collateral in needed to apply for the Loan. Approval is based on your monthly income. Usually between 3 to 5 times.
- e) Approval is more rigid than Housing Loan
Let me give you an example on the calculation:-
Loan Amount – RM 20,000
Interet Rate – 8%
Tenure – 5 Years
Calculation
RM 20,000 X 8% = RN1,600 a year
RM 1,600 X 5 years = RM8,000 ( Total Interest payable)
RM 20,000 + RM 8,000 = RM28,000
RM28,000 / 60 months (5 years) = RM 466.67 p/month installment
From the desk of
Michael Yeoh
Choose Your Legal Firm Wisely when you buy your property..
About
I have been in the Mortgage Industry for the last 12 years. I started my first job with Standard Chartered Bank in 1997 as a mortgage officer. Since then, I have moved to several banks and investment companies which includes, Hong Leong Bank, HSBC, Prudential Unit Trust and my last posting is with Hwang DBS Unit Trust as Regional Manager. I started my Mortgage Consultancy company 4 years ago.
