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Key Highlights of the Revised Reference Rate Framework

Bank Negara Malaysia (BNM) has announced a revised reference rate framework (RRF). Full article here in BNM’s website)

This will be effective from 1st August 2022. (NEXT YEAR, not immediately)

Briefly, first part to this revision is to have a Standardised Base Rate (SBR) across all banks. This will be linked solely to the Overnight Policy Rate(OPR) and this will be determined by the Monetary Policy of BNM.

With this in place, borrowers could now easily compare lending rates across banks.

The formula is:

Lending Rate = Reference rate + Spread. Do refer to the image below for more understanding.

This new framework will apply ONLY to home loans and personal loans.

Do note that all these would depend very much on the banks assessment of other factors such as borrowers’ credit risk profiles (repayment record). In other words, it means that if one could quality for loan under current reference rate framework, one would still qualify under the revised RRF. If one could not get the loan approved, then the results would still be the same; loan application will still be rejected.

A clear image from BNM as below for reference.

RRF Revised Rate Framework
RRF Revised Rate Framework

A standardised way is definitely better

Today, it’s a little confusing because every bank has a different base rate and yet the lowest base rate does not necessarily equal to the lowest home loan rate. So, if every bank has the same reference rate, then we just need to know which bank has the lowest spread. When the bank has more funds to lend, their spread is usually lower.

This is why some banks would entice customers with higher fixed deposit rates. When they have more funds to lend, they can afford to lend it with a slightly lower rate versus one bank which may have less deposits and thus would need to ensure maximum possible returns from their funds. Anyway, do ask your friendly neighbourhood mortgage friend for a more thorough explanation yeah.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.


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