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2006 March 27: Malaysia Raises Base Lending Rates Twice in 2 Months!

By Steven Khong

Due to the strengthening of Malaysia's economy, Bank Negara Malaysia (Malaysia's National Bank) has decreed twice in the short span of two months to raise the Base Lending Rate.

The Base Lending Rate is the base interest lending rate for the country. For instance, current real estate loans have interests dependent on the Base Lending Rate (BLR), plus an additional 0.15% to 0.25% per annum.

This followed the historic un-pegging of the currency - Ringgit Malaysia - from its previous fixed rate of 1 US dollar to 3.8 Ringgit Malaysia in October 2005. The pegging of the Ringgit Malaysia was done in a bold move to protect the currency from the devastating effects of the Asian Financial Crisis on the Malaysian economy, much to the initial consternation and advice of the World Bank. One year into the pegging, the World Bank has apologized for its initial brash decision and applauded the decisions of our then Prime Minister, Datuk Dr. Mahathir Mohammad.

In January 2006 the Base Lending Rate was raised from the last two years of 6.00% per annum to 6.25%. At 6.00%, the Base Lending Rate was at its lowest point ever over the past 20 years. Banks have cushioned the effects of this recent increase to its borrowers by declaring its internal Base Lending Rate as only 6.15%.

In Febuary 2006 the Base Lending Rate was again raised to 6.5% per annum.

I see these signs of increased interest rates to be a good sign, denoting the strengthening of Malaysia's economy and its increasing stability. Otherl signs point to a steeper upturn of the Malaysian economy, and thus higher valuation of property prices, and a gradual upturn of the property market.

This can only mean good news for property owners and investors - both local and overseas - who want to invest in a country with a stable and growing economy, strong government based on British law, plus advanced infrastructure and mainly English speaking locals.

To learn more about investing in Malaysia, please contact us, Simfoni Dinamik, so that we can work out an effective investment strategy for you, based on your personal needs and goals. Thank you.

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