The OPR is known as Overnight Policy Rate, an overnight interest rate set by Bank Negara Malaysia. It is a rate of a borrower bank has to pay to a leading bank for the funds borrowed. So, the OPR has an effect on economic growth, employment and inflation as well as an indicator of the health of a country’s overall economy and banking system.
11 May 2022: Bank Negara raises OPR to 2.0%
According to The Malaysian Reserve, Bank Negara Malaysia (BNM) increased the Overnight Policy Rate (OPR) from 1.75% to 2%. The Monetary Policy Committee (MPC) statement today noted the decision to hike was driven by inflationary pressures arising from the reopening of the global economy and the improvement in labour market conditions.
So, How This Will Affect Your Home Loan?
When BNM raises OPR, banks’ interest rates will be revised upward accordingly and in that case, making it more expensive for people to get a house loan.
In conclusion, a higher OPR (from 1.75% to 2%) will:
1) Monthly installment payments get HIGHER
Banks will pass on the higher borrowing cost in the form of a higher interest rate to consumers when the OPR goes up , which in turn your monthly installment payments get higher.
2) LONGER loan tenure, if the monthly installment amount is maintained
The repayment period will become longer due to the increase in interest rate, if the old monthly installment sum is maintained.
But, How About BNM Reduces OPR?
It will be cheaper for new property purchasers to take up a home loan and low interest rate when BNM reduces the OPR.
1) Monthly installment payments get LOWER
Banks are required to send out a notification letter on the revised installment amount when there is a BR/ BLR revision – this must be done at least 7 calendar days prior to the date the revised monthly installment comes into effect.
2) A SHORTER loan tenure, if the old monthly installment sum is maintained
Banks are required to lower the monthly installment of variable home loans accordingly, they will still provide consumers with the option to shorten their loan tenure instead.
OPR At A Glance
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