Recently, Bank Negara announced the increment of the Overnight Policy Rate (OPR) by 25 basis points to 2.25%. This was an additional increment on top of their announcement in May 2022 from 2.00%. Since July 2020, our OPR was at 1.75% before it increased in the period of 2 months to 2.25%. The overall OPR rate is still lower compared to early 2020 & the year before.
What Is Overnight Policy Rate (OPR)?
It is an overnight interest rate that was set by Bank Negara Malaysia that will determine the interest rate lent by the financial institution to another financial institution overnight. In other words, banks will lend each other money depending on whether they have a surplus or shortage in the daily activity of their customers such as deposits, withdrawals, or lending of money.
How Are Malaysians Affected By OPR?
The biggest impact usually comes from the property sector, especially if your property loan is under a variable loan. If your property loan is under a fixed rate, it will not affect you. For those who have a variable property loan to pay, you will notice that there will be an adjustment to your current property loan repayment which was lowered during the pandemic & it will be adjusted again accordingly. OPR is usually linked to Base Rates or Based Lending Rates which most banks will list their rates for your reference. In my opinion, a variable property loan is better so that we are able to get fair Base Lending Rates (BLR) compared to a fixed rate. Unless you are buying it during the low OPR period, you are able to get a good deal with a fixed rate.
If you are a fan of Fixed Deposits, you will be seeing a higher interest with the adjustment of the OPR. In 2020, Fixed Deposit interest was less than 2% but with the rise of OPR, more banks are offering more than 2%. While I’m trying to find the historical figure of Malaysian FD rates, I stumbled upon these data where we are seeing a higher return of Fixed Deposits before 1998. Since then, Fixed Deposit interest rates have gone down by a lot.
While OPR is linked directly to Malaysia’s economy, it also shows that our country’s economy is getting better since the pandemic. Inflation is inevitable with the current global situation due to material shortages, strong Covid containment policy in China & even the Ukraine-Russia war. You can refer to my latest post on Beating Inflation By Doing These 5 Things.
OSS!
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