Why would Bank Negara adopt SBR to replace BR?
Why did Bank Negara replace BR with SBR?
On August 1st, 2022, Bank Negara announced SBR to replace BR. Standardised Base Rate is the full name of this rate. Beginning on August 1, 2022, the SBR will serve as the new standard benchmark rate for all house loans issued.
To make it easier for borrowers to compare loan interest rates among banks, Bank Negara introduced SBR to replace BR.
BR
The BR reference rate plus the loan rate the bank was paid in those days made up the real lending rate.
BR reference rate + loan interest earned by bank = actual loan interest
Example: 2% + 1.4% = 3.4%
Each bank in the BR era is free to change the BR interest rate; they simply have to give the borrower advance notice by sending out a notice. Numerous banks have in the past raised the BR interest rate ahead of time in anticipation of Bank Negara’s announcement of rate cuts, only to drop the BR interest rate afterwards.
The new SBR structure is directly correlated with the National Bank’s overnight policy rate (OPR). The SBR is 2.25% because Bank Negara’s OPR is at 2.25 %. The SBR would also be 2.50% if Bank Negara announced a rate increase of 0.25% the next month.
SBR
The SBR plus the lending rate the bank is paid will be the real lending rate under the SBR system.
SBR standard benchmark rate + bank’s interest margin = actual loan interest
Example: 1.75% + 1.65% = 3.4%
The same SBR is used by all banks, so borrowers can determine whether bank offers more enticing mortgage rates by simply comparing the rates on the actual loan.
