What is the Overnight Policy Rate (OPR)?
As of May 6th, Bank Negara Malaysia has maintained the overnight policy rate (OPR) to 1.75%. Despite the impact of the COVID-19 pandemic, the central bank said the global economies continued to strengthen, including Malaysia.
As widely expected by economists, such as Juwai IQI’s Chief Economist Shan Saeed, said Bank Negara Malaysia had made plenty of OPR reduction, and it took a good 12 to 15 months for the policy lever to make its impact on the economy.
This, it is expected to bring a lot of positive effect on the Malaysian economy, included the BLR and Malaysian Ringgit exchange rate.
How does it affect housing loans?
As a homeowner, the cost of borrowing will be lessened. A lower OPR would trigger banks to adjust their lending base rate (BLR) and base financing (BFR). This would then indirectly affect the interest rates – which means lowered costs for borrowing or refinancing an existing home loan.
Lowering the OPR will boost the economy overall.
First of all, why did Bank Negara Malaysia decided to lower the OPR? It might be due to boosting the economy because when the OPR is lowered, the interest rate of any savings will also be lower too.
Through such development, people will be more willing to withdraw money from Fixed Deposits and focusing on investments.
Naturally, the first choice of investment would be property due to the stability of it. If you are considering investing in the property market, you might be interested in reading more about the “Top 9 States in Malaysia for an Investor to Consider in 2021.”
If you do not have any plans on buying a house, you should probably start a plan.
Why do you ask?
Because by lowering the OPR, the action will impact the house loan interest too.
For homebuyers, the house loan’s interest is quite a high proportion to the loan. Yet, once the OPR is lowered, the bank will lower the interest rate and immediately inform the buyer about the new rate and monthly payment amounts.
If you are a house buyer and did not receive any notices within the first three or four months, you might need to check in with the bank.
In layman terms, lowering OPR allows homebuyers more savings than their house loan’s interest.
The opportunities for investors
Currently, the property overview in Malaysia is heading towards where supply is more than the demand. For an investor, you can grab the chance to invest at the moment, and once the momentum of demand is higher than the supply, you can earn twice as usual.
In conclusion, the decision to lower the Overnight Policy Rate is to encourage every Malaysian to spend or invest through any bank of their choosing – allowing the boost on the fund’s liquidity and assisting the economy’s growth.
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