Impact on Interest Rate Increased

Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points to 3.25% on Thursday, the first time since May 2011 with economists expecting the rate hike to address the potential rise in financial imbalances.

How will it impacting on property investor?

So, will property investor be paying more interest for mortgage loans?

Any changes will impact floating rate loans which are common for mortgages. While the effect of the new lending rate framework is still unknown, an increase in OPR will likely have a knock-on effect on the rates charged by banks for home loans for the simple reason that banks adjust their lending rates by a similar quantum when OPR changes.

Historically, banks will raise about 20bps to 30 bps for a 25 bps hike in OPR.

For example, if the banks decide to pass on this hike to the consumers, the Base Lending Rate (BLR) will most likely increase by 25bps (0.25%) from 6.6% to 6.85%.

Here’s an example of how it would affect property investor:

Based on the example above, the 25 bps hike will result in 3% on your monthly mortgage. Investor  won’t be impacted severely by this immediately as can be seen in this example it would raise their monthly repayments by only about $40 for property price at $300K and $66 for property price at $500K.

Below is the past year interest rate trend for your perusal