We weren’t advertising any particular company or any of that sort of thing, but we and some friends have been doing a bit of survey on home loans recently.
When people talk of home loans, first thing that comes to mind are the banks. Especially when 5 or 6 of those big banks set up counters at property launches with all their complicated packages.
Recently, some of our friends have taken up home loans from insurance companies, offering fixed rate loans, guaranteed for the tenure of the loan up to 30 years. As far as we know, at the moment, only two companies are offering this - AIA and ING. AIA is offering a fixed rate of 6.15%p.a.
The main draw that attracts people to is summarized in their website:
Analysis of the lending rate over the past twenty three (23) years can only give us a historical guide of the interest rate cycle. Based on figures provided by Bank Negara (for the period between 1980 to 2003), the average Base Lending Rate (BLR) for commercial banks is 8.38% a year with an average lending rate of 9.80% This means that for a loan taken for the past twenty three (23) years, the average interest rates were charged at 9.78% whereby lending rates have peaked as high as 12% and as low as the current BLR of 6%.
There’s a graph from Bank Negara that shows the BLR and LR over the same period.
(graph taken from AIA website. Hope they don’t mind)
To be fair to the banks, most of them also have a fixed rate home loan scheme, usually under the Islamic banking system, which is open to all Malaysians regardless of whether they are Muslims or not. Also, as one of our friends put it, banks always offer incentives for refinancing (especially for the first 5 or 10 years) like zero moving cost, BLR-XX, to stay competitive. Maybe its a good idea to enjoy these benefits now, and go for fixed rates when (or if) the BLR shoots sky high in a couple of years.
But there is also a lockdown period to think of.
But anyway, fixed rate loans by insurance companies offer more options to housebuyers, and keeps everybody competitive.
