Base Rate

From 2nd January 2015 onwards, Bank Negara Malaysia will replace the Base Lending Rate (BLR) with the Base Rate as the new reference rate framework for new retail floating rate loans and the refinancing of existing loans, providing a more transparent reference rate for consumers to make better decisions on choosing loan products offered by financial institutions.

Base Lending Rate (BLR)

If you have already bought a house or are in the middle of looking for house, the acronym BLR should sound very familiar to you. BLR stands for Base Lending Rate, it is the rate of interest at which banks lend to customers.

BLR is a minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs. If there's a revision on OPR by Bank Negara Malaysia, the BLR of banking institutions will be revised accordingly. You can refer to the BLR of all banking institutions in Malaysia here.

Below table is the historical data for BLR from Year 1990 onwards:

Year	BLR (%)	Remark
1990	7.00
1991	7.50
1992	9.00
1993	9.50
1994	8.25
1995	6.60
1996	8.50
1997	9.25
1998	10.50
1999	8.00
2000	6.75
2001	6.75
2002	6.50
2003	6.50
2004	6.00
2005	6.00
2006	6.00
2007	6.75
2008	6.75
2009	5.55	Adjusted Mar 2009
2010	5.80	Adjusted Mar 2010
2010	6.05	Adjusted May 2010
2010	6.30	Adjusted Jul 2010
2011	6.60	Adjusted May 2011

The last revision on BLR was in Year 2011. We might expect a revision very soon, as mentioned in my last post on OPR.

Overnight Policy Rate (OPR)

When we are reading newspaper, sometimes we would come across Overnight Policy Rate (OPR) in the economy section. So what is OPR? OPR is actually an overnight interest rate set by Bank Negara Malaysia (BNM) used for monetary policy direction.

OPR is the interest rate at which a financial institution lends immediately available funds (balances within the Central Bank) to another financial institution overnight. OPR is under the new interest rate framework introduced by BNM since 23rd April 2004. Under this New Monetary Operating Procedures, OPR is the indicator of the monetary policy stance of BNM, with roles below:

1. As a signalling device to indicate the monetary policy stance;
2. As a target rate for the day-to-day liquidity operations of the Central Bank.

OPR will be decided in Monetary Policy Committee (MPC) meeting. Changes in the OPR trigger a chain of events that affect the base lending rate (BLR), short-term interest rates, fixed deposit rate, foreign exchange rates, long-term interest rates, the amount of money and credit.

Date	Change in OPR (%)	New OPR Level (%)
30 Nov 2004	0.00	2.70
30 Nov 2005	+0.30	3.00
22 Feb 2006	+0.25	3.25
26 Apr 2006	+0.25	3.50
24 Nov 2008	-0.25	3.25
21 Jan 2009	-0.75	2.50
24 Feb 2009	-0.50	2.00
04 Mar 2010	+0.25	2.25
13 May 2010	+0.25	2.50
08 Jul 2010	+0.25	2.75
05 May 2011	+0.25	3.00

Ultimately, a range of economic variables would be affected, including employment, output, and prices of goods and services which is the micro and macro factors on the economic. From the table above, the last adjustment for OPR was in Year 2011 and BNM is expected to maintain the OPR for the rest of this year but a possible 25 to 50 basis point hike is anticipated for Year 2014.