I was missing from writing these few weeks because I need to take care of my mom (she just had surgery) and at the same time both of us, my husband and I, we fall sick.
So, it’s a challenging time for us.
But, now I’m back and we do have so much content to put out for you.
Last month, even though we have so much on our plate but the sales are amazing!
Thank YOU for your support to us.
So, let’s talk about recent news – Bank Negara Lowers OPR by 25bps to 3%.
I know that we did a video for the changes of Overnight Policy Rate (OPR). If you want to catch the video. It’s here.
But, I just want to really go into the topic and I also know, not everyone will watch the video. So, I hope many of you will read this article.
First, what is the Overnight Policy Rate (OPR)?
Let me explain.
OPR is the interest rate/profit rate at which a bank lends to/receives from the investment with another bank.
OPR is determined by Bank Negara Malaysia in the Monetary Policy Committee Meeting held throughout the year.
A change in OPR will directly influence Base Rate (BR) or Base Lending Rate (BLR).
So, if an increase in OPR will have a significant increase to the BR and BLR too.
Okay, what is Base Lending Rate (BLR) & Base Rate (BR)?
Base Lending Rate (BLR) & Base Rate (BR) is a rate determined by financial institutions based on the cost of lending to consumers.
Why it’s so important to you?
While, if you have a home loan with a financial institution, they will charge interest based on the BR/BLR rate.
If the BR rate is 3.77%.
And the bank is offering an interest rate of BR + 0.58%, then your interest rate is 4.35%
But, if tomorrow BR change to 3.90%, so do your interest rates.
Now, your interest rate is BR 3.90% + 0.58% = 4.48%
If the BR rate reduces, maybe to 3.60%. So, does your interest rate.
BR 3.60% + 0.58% =4.18%
Can you spot the difference?
So, OPR definitely has a strong effect on the BR/BLR rate in which it will affect a consumer interest rate.
In this recent OPR changes, we can expect a drop in BR/BLR, home loan interest rates, and installment. That will be a piece of great news to all homeowner that still have a home loan with a bank.
What happens if the home loan interest rates increase or reduce?
When the home loan interest rate is increased, you will pay more interest. And when it reduces, you will pay lesser interest.
Certain banks will adjust the installment according to the new home loan interest rates. It will be higher if the interest rate is increase and lower if the interest rate is reduced.
However, there is a certain bank that will not adjust the installment. But, when the installment payment split to interest and principal, the interest portion will be lower and the principal portion will be more.
So, you need to figure out which method is using by your bank.
The changes of BR/BLR will take place between one to two weeks after the OPR announced its changes.
Recently, the first bank that took the first step to change their BR/BLR rate is Maybank.
In a statement, the banking group said its BR would drop 20 bps to 3.05% per annum from 3.25%, while its BLR would be revised to 6.7% per annum from 6.9%.
Maybank’s Islamic BR and BLR will also be reduced by 20 bps to 3.05% per annum (from 3.25%) and 6.7 per annum (from 6.9%) respectively.
And we can expect more bank will do so.
As a result of this OPR cut, we expect homeowners with existing loans to be paying roughly RM20 less on their monthly installments for every loan amount of RM100,000, once the changes are reflected onto the banks’ respective Base Rates.
When the interest rate is low, it will encourage more borrowing in the future.
So that is a little insight into the increase of OPR, BR/BLR, and the home loan interest rate.
If you have any questions or need help with a home loan, feel free to reach out to us.
I see you soon!
Online Mortgage Consultant