Banks can raise the interest rate of a loan in 2 cases!
Recently, there is news that the bank without the borrower’s knowledge to raise the interest rate of the loan, which led to the borrower to repay the mortgage after 10 years, only paid about 10% of the principal, this borrower loan for 20 years.
It is understood that banks can adjust the interest rate of a loan upwards in 2 cases, that is, when the borrower has defaulted on the loan, and the second case is when the national bank increases the OPR rate.
It is clearly stated in the mortgage contract that the bank has the right to increase the mortgage interest rate in case the borrower violates the contract, i.e. defaults on the loan. Banks can increase the interest rate up to 9%. Some banks require the borrower to be 2 months delinquent before they will raise the interest rate, while others will raise the interest rate if the borrower is 1 month delinquent.
When a borrower finds out that the bank has increased the interest rate, he or she can contact the bank for details and to discuss how to restore the original rate.
The second scenario is when the national bank raises the overnight policy rate (OPR) and domestic banks raise the prime rate (BR) in line with the national bank’s policy. The increase in the BR rate also means that the borrower has to pay more for the loan each month.
If the borrower does not notice the increase in the BR and continues to make the original monthly payment, the borrower will be in default and the bank will have the right to increase the interest rate on the mortgage.
For example, if the borrower was paying RM2500 per month, after the increase in the prime rate, the borrower will have to pay RM2600. If the borrower continues to pay RM2500, then the borrower has defaulted on the loan and the bank will increase the interest rate.
