OPR Increased to 2%: How Does This Affect Housing Loans?

On 11 May 2022, Bank Negara Malaysia announced the increase of the Overnight Policy Rate (OPR) by 25 bps from 1.75% to 2%, in line with “the sustained reopening of the global economy and the improvement in labour market conditions continue to support the recovery of economic activity”.

What does this mean to home buyers and businesses?

A higher OPR means that the borrowing cost will become more expensive for consumers. Banks will revise the costs following the increase in OPR by BNM, resulting in higher interest rates for home buyers and businesses. The higher cost can limit personal and commercial access to capital.

A lower OPR, on the other hand, brings the opposite result. 2020 recorded the lowest OPR rate at 1.75%. Learn how a lower OPR can affect the property market here.

The increase in OPR results in:

1. Higher monthly installment payments

The higher interest rates make the cost of borrowing more expensive, resulting in a hike in monthly installment payments.

2. Longer loan tenure

Thanks to the increase in the monthly installment amount, the repayment period will be extended if the old sum is maintained.

Since most housing loans in Malaysia are Full Flexi Loans or Semi Flexi Loans, this means that your monthly payment will fluctuate with the rise and fall of OPR.

The chart below shows a rough idea of the changes in monthly payments after the OPR increase:

Previous interest rate – 3% Current interest rate – 3.2% Future interest rate – 3.5% Monthly installment amount increase 
RM500K RM1924 RM1980 RM2066 RM56++
RM600K RM2309 RM2376 RM2479 RM67++
RM700K RM2693 RM2772 RM2893 RM79++

Credit: Andy Foong, IQI Real Estate Negotiator

Note that this information is only for reference – interest rates and percentages vary from bank to bank. Please check with your bank for the latest updates.


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