OCBC Bank (Malaysia) Bhd has introduced a home loan uniquely based on Mortgage Lending Rate (MLR) instead of Base Lending Rate (BLR) which traditional loans use.

According to OCBC, its latest MLR-based package, call Ideal Mortgage, is ‘more competitive’ than conventional BLR-based ones as it allows borrowers the flexibility of making “a significantly lower initial investment outlay on their loans during the lock-in period”.

The MLR, currently set at 4.70 per cent, is the bank’s internal reference rate developed exclusively for home loans. It is calculated based on the mortgage business as opposed to the BLR which takes into account overall banking cost.

The bank said Ideal Mortgage’s first-year rate of 2.5 per cent, currently the lowest in the market, is fixed and guarantee’s maturity date, whichever comes first.

Thereafter, the interest rate set at MLR minus 1.3 per cent.

Based on these rates (over a 25-year spread), the monthly repayment for a property worth RM250,00 works out to RM1,008 for the first year, and Rm1,1114 there after.

However, with many banks currently offereing a rate of BLR minus 2.3 per cent, a conventional loan repaid over the same 25-year period could work out to RM1,096 a month.

But OCBC reiterated that the loan targets those looking for the option of lower initial repayment.

It added that Ideal Mortgage is also attractive to those wishing to upgrade or sell their properties and pay off their loans over a short period.

This is because the package features a short lock-in period, which allow borrowers to settle or refinance their loans after three years, as opposed to the conventional five years.

Those seeking to use this option can do so at a lower exit rate of two per cent of the total loan amount.

The Ideal Mortgage package is applicable to properties valued RM150,000 and above.

Source : NST – Friday, July 10, 2009

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