My humble opinion, BLR will increase in the region of 25 to 40 basis
point in the next 2 quarters. 25 basis point simply means BLR will
adjust to 0.25%. BLR has been stagnant since May 2011.
Look at the chart below from The Department of Statistics.
Headline Inflation Increased in September
Don’t panic, let’s look at the damage when BLR increase in different
scenarios.
Annual
growth, (%)
8
Look at the table below.
Headline CPI
Food and non-alcoholic beverages
Transport
6
Mortgage Comparison Calculator
Base Rate
40 Basis Points
100 Basis
Points
200 Basis
Points
Loan Amount
$ 200,000
$ 200,000
$ 200,000
$ 200,000
Interest Rate
4.30%
4.70%
5.30%
6.30%
Loan Tenure
30
30
30
30
Monthly Payment
$ 989.74
$ 1,037.28
$ 1,110.61
$ 1,237.95
Total Monthly Payment
$ 989.74
$ 1,037.28
$ 1,110.61
$ 1,237.95
Number of Payments
360
360
360
360
Years to Payoff
30
30
30
30
Total Payments
$ 356,307
$ 373,419
$ 399,819
$ 445,660
4.6
3.9
4
2.6
2
Extra Monthly Payment
0
Sep 13
May 13
Jan 13
Sep 12
May 12
Jan 12
Sep 11
-2
Source: Department of Statistics Malaysia
My economics class during my university days seems very useful now. f you
were to look at the chart above you will notice that inflation increase from
less that 2% in August to 2.6% in September. Look at the blue line there is
a sharp increase in Transportation due to rising Petrol Price which in turn
contributes to the overall increase in inflation.
Now let’s get back to our 2 scenarios earlier. If Sugar subsidy is reduced
and GST forthcoming don’t you think when cost of goods increase, inflation
will also increased and this in turn will result to cost push inflation and at
the end the government will have to increased the Interest Rate to curb
inflation. When I meant rise in interest rate it means Base Lending Rate (BLR)
will also increase.
To make matters worse, recently the announcement of hike in electricity
tariff up to 15% again will course a ripple effect on other industries and in
turn will contribute to the increase in inflation and subsequently the interest
rate.
Take a look at the chart below:-
Historical Base Lending Rate
12
10.5%
10
Inflation
5.293%
8
6
6.6%
5.55%
4
Jul-10
May-11
May-10
2009
Mar-10
2008
2007
2006
2005
2004
2003
2002
2001
2000
1