KUALA LUMPUR, MALAYSIA - It will soon become easier and cheaper to get bank loans.

Following Bank Negara Malaysia's announcement on Monday to cut a key benchmark rate, several banks have announced plans to lower rates for loans and financing. Others are likely to follow.

Some financial institutions have even been calling up potential customers and offering loans over the phone.

Yesterday, Malayan Banking Bhd (Maybank), Maybank Islamic Bhd, CIMB Bank Bhd and CIMB Islamic Bank Bhd announced revisions in their base lending and base financing rates to 6.5 per cent.

The rate cuts will take effect on Monday.

Maybank group chief executive officer Datuk Seri Abdul Wahid Omar said the move would see borrowers benefiting immediately as interest rates of all loans pegged to the bank's BLR would be adjusted accordingly.

CIMB Group chief executive Datuk Seri Nazir Razak said the move would help existing and potential borrowers contend with an environment of sharply moderating economic growth.

"We welcome borrowers to engage us if they need to restructure their payment schedules," he said in a statement.

Customers could also expect to pay lower rates for Islamic financing compared with conventional loans at CIMB Group, the statement added.

RAM Holdings Bhd group chief economist Yeah Kim Leng expects banks to lower interest rates for both loans and deposits.

"As such, borrowers will be paying less to service their existing loans with floating rates while individuals and businesses seeking to borrow from banks will find the cost of borrowing is now lower."

With lower cost of borrowing or monthly repayments, Yeah said consumers and businesses would be encouraged to either spend or save more, depending on individual circumstances.

"On the flip side, deposit rates will also decline, meaning less interest income for savers. A cut in interest rate is a form of disincentive to save, thereby encouraging people to spend."

With higher overall spending, industries and companies will remain in business and need not cut back on production and employment.

Housing developers were one of the first to welcome the move and they hoped it would encourage more people to purchase homes.

"I am confident that the reduced rate will convince those who have been adopting a wait-and-see attitude to close the deal on their dream homes," said Real Estate and Housing Developers' Association Malaysia president Datuk Ng Seing Liong.

He said there should always be easy access to affordable financing for the housing sector, both for bridging and end financing, as the property sector has proven to help generate domestic growth during previous downturns.

Rehda proposed that the central bank set aside a dedicated financing quota for the housing sector and relax restrictive draw-down requirements.