If you’re a Malaysia property buyer, learn everything you need to know about the Standardised Base Rate (SBR) with this comprehensive guide. Get expert insights and tips to make informed property buying decisions.
Home loan calculations can be confusing, especially when there are different types of interest rates, fluctuating figures, and complicated jargon to take into account. However, with the introduction of the Standardised Base Rate (SBR) in Malaysia, it will be easier to determine the cost of buying a home. The SBR, which replaces the Base Rate (BR), is a common reference rate used by all financial institutions for retail floating-rate loans applied after August 1, 2022. This will primarily affect mortgage loans and personal loans.
The SBR was introduced to simplify the loan process by ensuring uniform rates across financial institutions. Previously, each institution would use its own method to set their base rate, which would lead to confusion and difficulty in comparing rates. However, with the SBR linked solely to the Overnight Policy Rate (OPR), any changes to the loan’s interest rate will only occur if the OPR rises or decreases.
Each bank will also have a spread, which encompasses credit and liquidity risk premiums, profit margins, and operating costs. The spread, which is fixed throughout the loan’s lifetime, can also be affected by increased credit risk. The banks will use the SBR and spread to determine their lending rate, making it easier for customers to compare and make informed decisions.
It’s important to note that existing loans approved before August 1, 2022, will continue to follow the BR/BLR until they are repaid in full. However, they will move in tandem with the OPR after August 1. The OPR and SBR have a linear relationship, so if the OPR rises, the SBR will also increase by the same amount.
In conclusion, the SBR offers a more straightforward and efficient way to compare loan rates and make informed decisions. However, it’s still important to do your research, as lending rates can vary based on how each bank calculates its spread.
