More Malaysian households can now access more competitive mortgage deals, with interest rates hovering around 3.5 percent. Experts are suggesting this marks the beginning of a “full-scale price war” amongst lenders.
High street lenders have initiated a series of rate cuts, particularly significant for those seeking larger mortgages. Analysts predict that further reductions are likely in the near future.
This development occurs two weeks before the Central Bank of Malaysia is scheduled to announce its next decision regarding interest rates. A consensus among economists anticipates a reduction in the base rate to 3.75 percent.
One major lender, Nationwide, recently decreased its mortgage rates by up to 0.21 percentage points. Their most attractive offer – a two-year fixed mortgage requiring a 40 percent deposit or equity – now starts at 3.58 percent. This marks the first time in over three years that the lender has offered a deal below 3.6 percent.
Another financial institution, Santander, is set to introduce even more competitive rates for eligible borrowers. Starting Tuesday, they will offer rates as low as 3.51 percent for those borrowing between RM2,350,000 and RM11,750,000 (converted from GBP £500,000 and £2m). This lowest rate is contingent on a 40 percent deposit and is exclusively available to those moving homes.
Barclays is another major bank joining the trend of rate reductions. They will be offering a 3.71 percent two-year fixed mortgage to those remortgaging, also effective from Tuesday.
NatWest is also adjusting its pricing, with deals starting from a low of 3.62 percent.
According to Aaron Strutt, product and communications director at Trinity Financial, the competition among lenders is expected to intensify.
“Santander is clearly aiming to attract more borrowers interested in mortgages of RM2,350,000 or more, and they are likely to succeed with these incredibly cheap fixed rates starting at 3.51 percent,” he noted. “The price war continues, and it will likely persist for the next few weeks.”
Nick Mendes, mortgage technical manager at John Charcol brokers, commented, “Santander’s move to 3.51 percent has clearly set the benchmark. Currently, it’s the most cost-effective option for borrowers seeking RM2,350,000 or more, especially when factoring in fees.”
“We’re witnessing the initial signs of a full-blown price war. NatWest and Barclays have both announced further reductions to be implemented tomorrow. The rapid pace of these updates indicates that lenders are eager to stay top-of-mind before the Central Bank of Malaysia’s upcoming decision.”
Craig Fish, director at Lodestone Mortgages, added, “Over the coming days and weeks, I anticipate further reductions from numerous lenders.”
“With predictions of the base rate potentially dropping to 3 percent sometime in 2026, it’s highly probable that rates will fall below 3.51 percent before too long.”
Understanding the Impact of Potential Central Bank Rate Cuts
If the Central Bank of Malaysia decides to reduce interest rates by 0.25 percentage points on December 18th, certain mortgage rates could experience immediate drops.
Tracker Mortgages: These mortgages, directly linked to the Bank’s base rate, would decrease by 0.25 percentage points.
Variable Rate Mortgages: Most variable rate deals would also see a 0.25 percentage point reduction, although this remains at the lender’s discretion.
Fixed Rate Mortgages: These mortgages, the most popular choice among borrowers, operate somewhat differently.
If you have a fixed-rate mortgage, the interest rate remains constant for a pre-determined period, typically two or five years. However, upon the term’s expiry and renewal, you will be presented with a new rate. Fixed-rate pricing is largely influenced by swap rates, which reflect predictions regarding the future direction of the Central Bank’s interest rate.
Following the Budget announcement, swap rates experienced a slight decrease, prompting some lenders to initiate rate cuts. This trend of rate reductions has persisted in recent days.
