/// Contributor
Michael Yeoh
The Mortgage Expert
With over 15 years of experience in the
mortgage and investment industry and
working with prominent companies
such as Standard Chartered Bank,
Hong Leong Bank, HSBC and Hwang
DBS Unit Trust, Michael has helped
thousands of loan borrowers by
providing comprehensive mortgage
advisory and solutions.
Michael regularly conducts mortgage
courses and has produced many
graduates. He is also a regular
columnist and also has being featured
in New Straits Times Press, The Star,
Property Guru and also Property
Hunter magazine. He speaks regularly
in Property Exhibitions, Seminars and
also for developers.
You can get in touch with him at
Website: www.michaelyeoh.com.my
Will Base Lending Rate Increment
Affect You?
Will Base Lending Rate increase? What happens if it does?
If you have read recent write ups in the newspapers and magazines the last couple of months, you would
have noticed many predictions from analysts saying that Base Lending Rate (BLR) will increase in July. Many
existing and new loan borrowers are very concerned about the potential hike. Well, in this article I would
like to shed some light on this subject matter based on my experience.
Firstly, let’s look at the events that will lead to the increase of BLR. In September last year the government
announced the reduction of fuel subsidy which in turn caused the spike in fuel price for Ron95 by 20 cents.
This will cause bandwagon effect on prices of other goods and services.
This was followed by other increments as well. During the Budget 2014 announcement, it was announced
that sugar subsidy will be reduced by 34 cents per kilo. Then we had increments in electricity tariff and
insurance premium this year. What about the GST implementation in April 2015? It seems that everything
will go up in price.
With these price hikes, the next thing that will have to go up as well is inflation. Before the hike in fuel price,
inflation was at below 2%. According to the latest figures by Bank Negara, inflation has increased to 3.5%
as of March 2014. This is what we call cost push inflation. When the price of goods goes up, it will push
inflation up.
While the author makes reasonable
efforts to present information which
he believes to be reliable, the author
makes no representation that the
information or opinions contained in
this article is accurate and complete.
Readers are advised to seek specific
professional advice before acting on
the views.
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Inflation goes up. What’s next? Let’s look at the past. In June 1998 during the Asian financial crisis, inflation
rose to 6.2% and at the same time BLR increased to its highest level at 12.27%. As per our latest figures,
inflation has reached 3.5% and our BLR is still holding strong at 6.6% since May 2011. BLR cannot stay at
this rate forever and it will definitely have to go up due to inflationary pressure.
Now everyone is anxiously waiting for Bank Negara to announce whether there will be any increase in
Overnight Policy Rate (OPR) in July. OPR is correlated to BLR. Some analysts predict an increase of OPR by 50
basis points which in turn will increase BLR by 0.5%. As I have mentioned in my seminars, I am predicting an
increase of between 25 and 40 basis point. The first increment will not be much but there might be further
increments in future.
Now that I predict BLR will increase, what happens next? What will be the impact on new property purchasers
and even investors? My advice to everyone, do not panic and continue to read this article.