Bank Negara Malaysia's Monetary Policy Committee (MPC) has once again made a surprise move to raise the Overnight Policy Rate (OPR) by 25 basis points from 2% to 2.25%. The ceiling and floor rates for the OPR's corridor have been raised to  2.50% and 2%, respectively. 

In May, BNM raised the OPR by 25 basis points to 2%. Meanwhile, the ceiling and floor rates for the OPR's corridor were raised to 2.25% and 1.75%, respectively.

According to BNM, despite some improvement in global supply chain circumstances, inflationary pressures have continued to rise, owing mostly to high commodity costs and strong demand. 

With this, central banks are anticipated to continue changing their monetary policy settings, more quickly than others, in order to decrease inflationary pressures.

While economic activity in Malaysia has continued to grow in recent months supported by strong local demand, external demand is likely to weaken due to global growth challenges. 

The reopening of international borders on 1 April 2022, has aided in the recovery of tourism-related businesses.

Growth continues to be driven by exports and retail spending, with the unemployment rate continuing to fall. The completion of multi-year projects continues to enhance investment activity and prospects. 

Victor Yong

Director of Property Hunter 

According to Property Hunter Director, Victor Yong, with this move by BNM, property prices are expected to be affected in the near future. 

The MPC agreed to increase the level of monetary accommodation while they continue to examine changing conditions and their implications for domestic inflation and growth In light of the Malaysian economy's good growth prospects.

Monetary policy remains accommodating and supportive of economic development at the present OPR level.  Any future modifications to monetary policy settings would be moderate and gradual, ensuring that monetary policy remains accommodating in order to foster sustained economic development in an environment of price stability.

How Does Overnight Policy Rate Effect My Home Loan?

OPR is an Overnight Interest Rate by Bank Negara Malaysia(BNM) to determine the interest rate that financial institutions can lend. Since lending is a key component of a bank's business, maintaining a balance between their available cash flow is essential to satisfying the BNM's liquidity criteria.

Many homeowners are unaware that the overnight interest rate affects their home loan interest rates as when interest rates increase, the cost of home loans increases for borrowers. 

Similarly, when interest rates decrease, the cost of home loans decreases for borrowers. 

Although the OPR has recently increased, it is still reasonable for purchasers or those seeking new home loans. Interested purchasers can negotiate an initial agreement at a reduced interest rate. Although it may not be the lowest it has ever been, it is still quite acceptable.