Saturday, February 26, 2011

Latest FD, EPF, Inflation, BLR and Saving Interest Rates History Trend in Malaysia

If you wonder where to get the latest FD (Fixed Deposit), saving interest, EPF (Employee Provident Fund) dividend, BLR (Base Lending Rate) and inflation rates history trend in Malaysia, this is the place for you. I wrote about a similar topic in my previous post (almost 3 years ago) and apparently it is out-dated. The latest data was only up to 2007.

I will use this post to keep track of the latest interest rates. As you can see from the graph or chart below, I put the inflation rate as reference – green line. Any interest rates above the green line is good to go and this is where you want to put your money into. However for those who are buying house, you need to look at the BLR – brown line, any investment return that higher than BLR is where you want to put your money into especially if you don’t like Flexi loan package.


[Updated: 26 April 2014] 



What can we conclude from this trend?
  • Saving rates is getting lower and lower. Thus, you shouldn’t put your money in saving at all. For instance, if your monthly expenses is RM3K, you just need to make sure that you have RM4K in your saving account every month. RM1K extra is for backup.
  • FD is as useless as saving but it is still better because it is higher than inflation rate in most of the years. But keep in mind that personal inflation rate is the thing that you want to look at (not the inflation rate reported by the government!)  
    • As expected, EPF is the best investment vehicle (of course only compared to FD and saving) and it is catching up the BLR rate (but still below BLR). This tells you that withdrawing your EPF money to pay your house loan is the right choice. How about withdrawing your EPF for Mutual Fund? Yes, but do this only when you believe the mutual fund return could be higher than 6%.
    • 6% is a important value (based on EPF dividend return and also BLR). You will use your extra money to invest (after you have enough emergency fund) and your investment return should at least more than 6%. If not, you’re making a bad investment. 
    [Updated: 28 Jan 2012]: Check it out the graph in 2011, inflation rate is now catching up with FD! :)

    [Updated: 26 April 2014]: Update data up to 2013, inflation has moved down (lower than FD) and EPF is till performing good!

    P/S: Well, to summarize: don’t put your money in saving and use FD as emergency fund. EPF dividend rate and BLR are very important because that is the investment goal that you want to set (i.e. Any of your investment return from stock, mutual fund, and bonds should be more than 6%).

    25 Comments:

    MK - don't know much, want to learn more said...

    Hi ChampDog.
    Thanks for the updates on the useful statistics.

    Just a Q to clarify - may i understand how U conclude from it that "FD should be used as your emergency fund. That is 6X of your income. If your income is RM5K, you need to put RM30K in your FD."? I thought it's usually based on one's average monthly expenses X3, X6 or X12 (woohoo!)

    ChampDog said...

    Thanks MK! That is a good question.

    AS for FD why should used as your emergency fund rather than your saving is because:

    (1) You can withdraw the money anytime from the bank as you need it as emergency
    (2) It is is higher interest than saving.

    This is just my opinion. Let me know if that doesn't make sense.

    As for how much is needed for emergency fund, it is very subjective and it is based on personal.

    The key thing is: How much is needed until you feel "safe" after you consider the worst case scenario?

    What I have in mind is if I lost my income (e.g. RM5K) today for same reasons, how long I can get back this income based on worst case scenario? If the answer is 3 months, I need 3 months emergency fund. If the answers is 6 months, I need 6 months.

    You can based on the expenses but you need to be very clear that you can only sustain your expenses. For example, you spend RM3K and use RM2K for your monthly investment (for total of RM5K income), you will have to stop investing the RM2K. Also how accurate you can really calculate your expenses? You may need more than RM3K in reality. Don't forget about loan payment, insurance payment as well...

    Hope that helps. Let me know if that doesn't make sense to you. We can further discuss. :)

    Kris said...

    @ChampDog,

    I want to add that it might be better to put your emergency fund into your house flexi loan account instead of FD.

    If need arises, you still can withdraw from the flexi loan account. :D

    Imagine how much interest you can save if you dump in 6x of your income :D

    ChampDog said...

    Thanks for pointing that out. That is very true because in most of the cases, you want to clear your house loan or reduce the interest payment as much as you can.

    Yes, I agree you with you. If you have Flexi-loan account, you may as well put your emergency money there instead of putting in FD.

    Alvin said...

    wah good post. someone used to ask me where to get the FD history for last 3 yrs..i donno how :P

    anyway..i think i mampus already, my FD is not even 1 month of my monthly income :|

    ChampDog said...

    I think as long as we have emergency fund, that is good enough - not a must to keep it in FD as long as you have way to take out some cash during emergency.

    Anonymous said...

    Is it better to get housing loan using (FD rate + %) than (BLR rate - %)?

    Anonymous said...

    thank you so much for the post..i was wondering where to get the latest chart on malaysian fixed deposit rates. I am currently doing a thesis on demand for life insurance and macroeconomic variables. thx again!

    ChampDog said...

    Is the (FD rate + %) equals to (BLR rate – %) now? Anyway, I bet it doesn’t make up a huge difference in future. What the bank tells you is if you don’t like the BLR fluctuation, here is the loan based on FD solution for you. The reason why they can do that is there is correlation between FD and BLR. BLR goes up, FD goes up as well. So back to the question, I really don’t know the answer because I believe no one will know. Anyone want to help me here?

    You’re welcome. About the thesis on demand for life insurance and macroeconomic, send me a copy when you’re done! :D

    R.ik@live.com said...

    Hi, thanks for the information here. I have my first home and still on loan. Because Public bank doesn't notify me of the increased BLR. I did ask Public bank loan dept. Yet they said that is was normal for the first few year where my loan looks stationary. For the first 3 yrs, I paid house interest only and under paid interest is brought to next month. This just snow ball my loan.

    I heard that we can request for a decrease BLR loan. I tried to ask them for a form, they say "don't have" but ask me to write a letter to public bank HQ for that. I ask them if they can write out a simple sample, they refuse and their excuse is "if every owner come here and did the same thing then I will be very bz".

    BTW, could you let me know the lowest house loan BLR and from which bank? Thank you.

    ChampDog said...

    I’m using HSBC myself and if not mistaken I remember they did send me something just to notify me the changes of the BLR which eventually affects the interest %. I”m not sure about the first 3 years for HSBC because there are no changes during my time. I will think they should but if the bank tells you no, most probably they don’t for Public Bank.

    Usually we don’t want to pay for the interest only but should also pay to reduce the principal. You should instruct your bank to do that or else you’re just paying for the interest. I can’t remember exactly, the bank is very tricky that you must be aware of. For example you take loan of RM100K but the bank only release RM20K to the developer. They will start charging your interest based on RM100K not RM20K. You will need to instruct the bank to do this calculate interest based on RM20K. This is only assuming I remember this correctly because this was about 5+ years ago. You can confirm this and don’t let the bank to charge you extra!

    For reducing the loan package, this is called refinancing. Different bank may offer the cheaper loan package and it could be from the same bank too because over time the loan package will change. You do this only you think that’s worth and this is usually when you still have big amount of debt that not yet to be settled and the loan package is a lot more cheaper than the time you take the loan. Be careful on refinancing because there is some extra charges, so make sure you calculate carefully.

    P/S: The bank which offers lowest BLR is Bank of Tokyo-Mitsubishi UFJ (Malaysia).

    Anonymous said...

    hi sir..
    sorry for asking this kind of question but can you tell me where did you get this saving data?
    because i need to do a research for my final year paper...i can't found the savings data in worldbank statistic and also in bank negara malaysia statistic...so can i have some information where did you get the data...sorry for asking this kind of question but i really need your help...
    tq sir..

    ChampDog said...

    My bad. I should have listed the source. Regarding the history data, I get it from a friend who is personal finance agent. As for where he gets it, I"m not sure about it. :D

    I try tried list down some of the these website that may help:

    1. www.tradingeconomics.com
    2. www.kwsp.gov.my
    3. www.bankinginfo.com.my

    Good luck!

    Anonymous said...

    if my loan package interest rate is (current BLR rate - 2%) from certain bank, would it be still worthwhile for me to withdraw money from EPF 2nd account to pay to the bank to reduce my loan sum??
    Eg. (current blr -2%) =6.6-2%= 4.6% but usually the EFP dividen rate for the past 2 years is higher than ....so any advice from you???

    ChampDog said...

    Good question. I think if your EPF return is higher than your loan interest, you do not need to withdraw your money to reduce your loan sum. :)

    That's why if you are using flexi loan account, putting all your money there may not be a wise choice. This is usually people told you to do. :)

    You should only put the emergency fund to that felxi loan and invest the rest where the ROI is higher than your loan interest.

    Michael Tsen said...

    i used to use FD as emergency fund, then i plan my life better so I keep most fund in mutual fund. I only need a small amount to last 1-2 weeks before I get my money back from mutual fund which is usually only 2-3 days. then as I grow even older, life seems like no emergency any more. everything in life is a cycle of the last. so now my emergency money become my coffin money ...

    ChampDog said...

    But I think it is still needed because you do not know when is the black swan event! :)

    Keeping small amount of fund that last 1-2 weeks and then keep the rest of fund in the mutual fund sound like a pretty good idea. Why? It should work out too right?

    housing loan said...

    I do think that if half of the EPF contributors go to withdraw money from EPF, they will have a big trouble for issuing money due to a lot of money been squandering in throwing into bad government linked companies.

    ChampDog said...

    I have no comment on that because I do not sure about that. :)

    Billy said...

    really like this simple post ... Thanks.

    Anonymous said...

    i think for the emergency fund part of it can be saved as BOnd funds from public mutual etc instead of FDs entirely (maybe 50%?).. the return is like 5%, higher than 3% of FD. withdrawal from it will only take u 10 days max. Finish using ur FDs first b4 moving to ur bond, dont you think? charges for the bond fund is only 0.25%, rite? a one time charge..

    ChampDog said...

    Yes, putting the emergency fund in the bond fund rather than FD is good approach too. The risk is sometimes the bond ROI % could be lesser than FD% but that is rarely happen.

    You can go also go for those Wawasan 2020, AS 1Malaysia and etc.

    John said...

    Hi ChampDog, Thanks for the info shared, it's useful for me to prepare my presentation chart.

    Keep it up.

    Thanks you so much and gambate.

    ChampDog said...

    You're welcome, John. :)

    Anonymous said...

    may i know where the charts and table's source from? billion thanks


    Didn't find what you want? Use Google Search Engine below: