KLIBOR based housing loan has been introduced to Malaysia property market since mid of last year. Until today, only Standard Chartered bank offering this type of product and named it as MortgageKLIBOR.

Interest rates

Image credit to Susan & her 5d

The only question comes into my mind is why only one bank offering this?

From my reading in few forums, most of the conclusion given is KLIBOR more fluctuating and react fastest to sentiment of economy. Undeniable KLIBOR is more fluctuating because the interest rates pegged to the 3-month Kuala Lumpur Inter-Bank Offered Rate (KLIBOR), which mean the KLIBOR rate changed every three months.

People tend to feel insecure if the rates changed frequently and this maybe one of the reason this types of loan is not popular in property market.  In this article, we will perform case study to compare interest rates offered by BLR & KLIBOR based home loan.

The graph below shown the historical rate of BLR and KLIBOR  from year 2005 to year 2009. The table below listed the historical rates in montly basis in detail and the different between both rates. In conclusion, even though KLIBOR is more fluctuating, but it does reflect to the BLR change and the changes is small if the BLR maintained in same rate.

Comparison between BLR & KLIBOR

Rates table BLR & KLIBOR

The average KLIBOR for BLR maintained at 6.75 (31 months) is: 3.69%

The average KLIBOR for BLR maintained at 5.55 (8 months till now) is: 2.127%

The average KLIBOR for past 4 years is: 3.34%

The average BLR for past 4 years is: 6.47%

Case Study 1:

  • Loan Amount: 300k
  • ZEC(Zero Entry cos) or ACA t (All Cost Absorbed in MortgageKLIBOR)
  • With MRTA
  • Term Loan
  • Loan tenure 30 years
BLR Housing Loan MortgageKLIBOR
Rates BLR – 2.3 whole tenure

(Rates = 3.25)

 Year 1-2 : KLIBOR + 0.86 (Rates = 2.99%)

Remaining Tenure : KLIBOR + 1.06 (Rates = 3.19%)
Average Interest(whole tenure) 3.25 % 3.18 %
Total Interest RM 170,022.46 RM 165,096
Total Payment RM 470,022.46 RM 465,096
Average rate when BLR = 6.75 6.75-2.3 = 4.45% 3.69 + 1.06 = 4.75
Average rate for past 4 years 6.47-2.3 = 4.17% 3.34 + 1.06 =  4.40

Case Study 2:

  • Loan Amount: 200k
  • ZEC(Zero Entry cos) or ACA t (All Cost Absorbed in MortgageKLIBOR)
  • With MRTA
  • Term Loan
  • Loan tenure 30 years
BLR Housing Loan MortgageKLIBOR
Rates BLR – 2.2 whole tenure

(Rates = 3.35)

 Year 1-2 : KLIBOR + 0.86 (Rates = 2.99%)

Remaining Tenure : KLIBOR + 1.16 (Rates = 3.29%)
Average Interest(whole tenure) 3.35 % 3.27 %
Total Interest RM 117,313.07 RM 113,536
Total Payment RM 317,313.07 RM 313,536
Average rate when BLR = 6.75 6.75-2.2 = 4.55% 3.69 + 1.16 = 4.85
Average rate for past 4 years 6.47-2.2 = 4.27% 3.34 + 1.16 =  4.50

Conclusion:

  • For ideal case, if the rates remain unchange for the entire tenure, KLIBOR package offer lower interest rates thus lower interest to pay. The different between KLIBOR package and BLR package is less than 0.1% only.
  • When BLR rate increase to 6.75, average KLIBOR is higher, thus MortgageKLIBOR package is charging more interest. The different between KLIBOR package and BLR package is less than 0.3%.
  • For average 4 years times, MortgageKLIBOR is more expensive. The different between KLIBOR package and BLR package is  about 0.2%.
  • In ideal case, which unlikely happen, MortgageKLIBOR is offering lower rates, but only 0.1% different. So for long term consideration, BLR package definitely is lower interest rates.

As we always heard, figures tell the truth. I believe my readers are smart enough to read the figure above. This comparison purely compare the rates given and to know which types of loan actually allow us to pay less interest. This is not recommendation to any loan, but served as guides only.  The other factor such as withdraw flexibility, margin finance, bank and etc  should take into consideration when taking a property loan.

You might be interested to read more about MLR(Mortgage Lending Rate) offer by OCBC bank.

http://moneysospecial.com/mortgage-loan/ocbc-ideal-mortgage/