KUALA LUMPUR: Banks have begun raising their base lending rates (BLRs) following Bank Negara’s move to lift the overnight policy rate (OPR) by 25 basis points last week.

Five of the largest banks in the country raised their BLR to 5.8%.

Malayan Banking Bhd (Maybank) and CIMB Bank Bhd were the first two banks to announce their interest rate hike from 5.55%.

The two banks raised their BLR and base financing rates to 5.8% effective today following Bank Negara’s OPR revision last Thursday.

In a statement, Maybank president and CEO Datuk Seri Abdul Wahid Omar said the interest rate revision was based on the recent adjustment in the OPR.

“We expect to see better growth from our core business segments, leveraging on the improving economic environment and as more customers take advantage of the diversity of our product and service offerings,” he added.

Public Bank will also raise its BLR to 5.8% today, according to Bank Negara’s banking info website.

“We are supportive of Bank Negara’s move to normalise interest rates as the economy regains stability and are immediately transmitting it to both savers and borrowers,’’ said CIMB group chief executive Datuk Seri Nazir Razak in a statement.

Nazir said it was the right time to raise interest rates as the economic environment had normalised and growth momentum was strong.

“We saw the fourth quarter gross domestic product (GDP) numbers and we are looking at a GDP growth north of 4% this year potentially,’’ he told reporters at the launch of CIMB Twin Yield Income Investment structured product yesterday.

“Those conditions suggest that it is time to normalise interest rates. As best as I can tell, it is a good decision.’’

CIMB also raised its savings and fixed deposit rates by up to 25 basis points.

The RHB banking group also raised its BLR for RHB Bank Bhd to 5.8% today.

In a statement, group managing director Datuk Tajuddin Atan said RHB would be balancing the increased borrowing rates by offering more competitive rates for depositors.

Hong Leong Bank Bhd will increase its BLR to 5.8% effective March 10.

Bank Negara raised the OPR as the economy has improved significantly and returned to its path to recovery.

“Given this improved economic outlook, the Monetary Policy Committee (MPC) decided to adjust the OPR towards normalising monetary conditions and preventing the risk of financial imbalances that could undermine the economic recovery process,’’ said Bank Negara in its monetary policy statement last week.

“At the new level of the OPR, the stance of monetary policy continues to remain accommodative and supportive of economic growth.”

A rise in interest rates is usually greeted with trepidation as economists typically worry about its impact on growth and demand.

This time around, that apprehension is not yet visible.

“At the moment the impact will not be great as it is coming off historic lows,’’ said AmResearch economist Manokaran Mottain.

The Association of Banks Malaysia said the increase in OPR would not impede access to financing nor affect the industry’s lending activities.

The banking industry recorded a loans growth of 8.6% in January and 7.8% in December.

Analysts said the impact the BLR increase would have on bank’s profits would depend on whether deposit rates would be raised by the same quantum.

They said bank margins were squeezed when interest rates were cut but they expected net interest margins to widen as interest rates rose.

PETALING JAYA: Potential house buyers are still wary about making property purchases despite lower mortgage rates as the economic outlook remains uncertain, analysts said.

Average mortgage rates have fallen to about 3.5%, but at the same time banks have been more stringent on the approval of loans. The average mortgage rate is obtained from base lending rate (BLR) of 5.55% minus 1.5% to 2.4% for housing loans (or effective annual rates between 3.15% and 4.05%), depending on the amount and tenure of loans, and the package customers sign up for.

OSK Research said the attraction of lower mortgage rates had been superseded by fears of income security amid a deteriorating economic outlook.

“For those who are still financially sound, most would rather wait a while longer to snatch up better bargains a few more months down the road. Some are hoping for developers to come up with more creative and attractive perks and some are also waiting for prices to drop further, if any, before they are convinced to buy,” the OSK analyst told StarBiz.

The research house said downside risk for landed properties appeared limited compared to luxury condominiums, with the demand for landed properties expected to return by year-end.

“Most of the homebuyers in this segment are cash-rich and not highly leveraged. Given the accommodative interest rates today, any forced-selling or foreclosures of properties like the one we saw during the 1997/98 Asian Financial Crisis will be limited in this downcycle,” it said.

OSK Research expects the demand for luxury condominiums to decline by 30% to 40% in 2010 from 2008, with luxury condo prices already currently down by 15% to 20%.

An analyst from Kenanga Research agrees that the bearish economic outlook is making potential buyers hesitant about buying properties now.

“What if this (sign of market recovery) is just one-off data? What we need is for the sentiment to improve,” she said, noting that only 60% of bookings had been translated to actual sales compared to almost 100% previously due to more stringent loan requirements.

Jupiter Securities Sdn Bhd head of research Pong Teng Siew said that with the mortgage rates of 3.5% and effective cost of funds of 1.5%, banks net interest margin should be about 2% now.

“But cost of funds for smaller banks such as EON Capital Bhd, RHB Capital Bhd, AMMB Holdings Bhd are higher (slightly over 2%) because of higher interest bearing liabilities,” he told StarBiz.

A house buyer contacted by StarBiz said his current mortgage loan interest rate was 3.15% for the first two years and 3.45% for the remaining tenure.

He recently signed up for a 20-year conventional home loan from Alliance Bank Malaysia Bhd for the purchase of a double-storey house.

He is paying about RM1,700 per month for his RM300,000 loan.

His loan package included a one-time payment of RM2,500 for mortgage reducing term assurance, legal fees and stamp duty.

Other banks are offering similar mortgage rates.

For example, RHB Bank is charging BLR minus 2.1% for housing loans that range from RM250,001 to RM500,000, while Hong Leong Bank Bhd is offering BLR minus 2.2% for a RM300,000 mortgage loan.

Malayan Banking Bhd uses a property’s location as one of the criteria to determine interest rate, but is still offering rates in the region of BLR minus 2%.

All these banks have BLR of 5.55%.

Article: By K.C. LAW

Source: http://biz.thestar.com.my/news/story.asp?file=/2009/4/29/business/3793031&sec=business

By LAALITHA HUNT, Tuesday November 3, 2009

PETALING JAYA: Average lending rates are on an uptick with banks possibly positioning themselves for a gradual increase in the rates for their long-term loans.

The monthly statistical bulletin released by Bank Negara for September showed that average lending rate (ALR) was 4.91% compared with 4.9% in August and 4.96% in July. The average base lending rate (BLR) remained unchanged at 5.51% as at Oct 15.

According to UOB Kay Hian Research’s latest update, one of the first loan segments to be impacted would be mortgages. The report said that financing for the purchase of residential properties, which comprise 27% of total loans in the banking system, would likely slow down due to the re-introduction of real property gains tax as part of the measures under Budget 2010.

Mortgage growth would also take a temporary adjustment due to a rise in effective lending rates as banks lowered their mortgage spreads, the research house added.

“Our market survey shows that mortgage spread has been reduced from the previous BLR minus 2%-2.3% to BLR minus 1.6%-1.9%,” the report said.

The rate increase was expected to mitigate the slower loans volume growth, the research house added.

“In this scenario, Public Bank would benefit the most from its strong loans growth supported by its strong branding and lower cost of funding,” the report said.

An analyst with another brokerage said he had heard reports of the rise in effective rates recently but declined to comment further. Banks, when contacted, declined comment on this matter.

Banking data for September continued to show strong credit demand from the household sector, leading to total loans growth of 7.2%.

Loan applications in the household sector amounted to RM23.2bil in September, compared with monthly average of RM22.8bil in the preceding eight months to August.

UOB Kay Hian Research noted that robust approvals in the six months to Sept 30 would sustain strong loans growth in the fourth quarter of this year and the first quarter of 2010.

“However, potential slower property sales and credit card demand due to the new budget measures would likely lead to slower loans growth in the second half of 2010,” the report said.

The research house, however, maintains its “overweight” call for the banks as slower growth would be mitigated by the increase in effective lending rate.

Source: http://biz.thestar.com.my/news/story.asp?file=/2009/11/3/business/5030022&sec=business