Bank Negara MPC: OPR drops to 2.75% = Great news for borrowers. Not so great for depositors.

Bank Negara OPR – January 2020

The Monetary Policy Committee (MPC) of Bank Negara Malaysia decided to reduce the Overnight Policy Rate (OPR) to 2.75 percent.

We don’t see banks rushing to update their narrative to home buyers to get onboard with the new Base Rates. But we expect it to be rolled up for all banks in the next few weeks. Scroll down to find the latest rates we collected from different news sources and read on to find out how this change affects you.

Latest Base Rate (BR), Base Lending Rate (BLR) and Effective Lending Rate (ELR) for all Banks in Malaysia (Updated 30 January 2020). Source: Bank Negara, Affin Bank, Bank of China, CIMB, Citibank, Hong Leong Bank, HSBC Bank, ICBC, Maybank, OCBC, Public Bank, RHB, Standard Chartered, UOB Malaysia in their websites and/or Press Releases.
Those banks who have not yet released a Press Announcement or updated their sites are intentionally left empty and will be updated at a later time.

The Good

The OPR changes has a direct influence on a bank’s Base Rate (BR) & Base Lending Rate (BLR), where the BR & BLR usually reduces/increases in tandem to an OPR cut/hike. To understand more about what BR and BLR is, Bank Negara has it in an infographic here.

Smaller OPR rates equals to cheaper options for property purchasers to take up a home mortgage as it would leverage on the lower initial interest rate.
When the previous OPR reduction from 3.25% to 3% in May of 2019, it had a co-relation effect to approval rates – According to MoF, loan approvals for that month was 13% higher.

The lower OPR also affects existing borrowers, bringing a reduction in the effective lending rate (ELR) of existing home loans that are following the variable floating rate, which means two things:

  1. Reduced installment payments. You should receive a notification letter on the revised instalment amount from your bank soon, if not, you can clarify it with your bank about these rates.
  2. Shortened tenure for repayment (only when the previous instalment sum is maintained). Banks will usually provide consumers with the option to shorten their loan tenure instead if a reduced repayment amount is not available.

The Ugly

This is the 2nd change in the Overnight Policy Rate (OPR) for the second time in less than six months. Where the 25 basis point reduction to 2.75% brings the country’s lending reference rate to its lowest in nine years.

The natural obvious trade-off, of course, is that a lower OPR means lower savings and fixed deposit rates. Leaving you to re-assess bank savings or investment strategy to ensure that you’re able to still get the most optimal returns from the bank.

Summarising it with Bank Negara’s statement:

For 2020, growth is expected to gradually improve, with continued support from household spending and better export performance. Overall investment activity is expected to record a modest recovery, underpinned by ongoing and new projects, both in the public and private sectors.

If you haven’t already read our guidelines, you can check out our 3 parts series in financing your home loans.
Check out Part 1, Part 2, and Part 3.

Will you buy a property this year?

We don’t have a crystal ball to tell the future, but we’d like to know what you think you would do after knowing the newly reduced Base Rates, do let us know in the comments!

If you’re in the market to buy, or if you’re looking to market your property, don’t forget to drop by and get a free pre-evaluation on your property’s sale value.

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