{"id":18169,"date":"2020-11-03T19:00:00","date_gmt":"2020-11-03T11:00:00","guid":{"rendered":"https:\/\/www.comparehero.my\/blog\/uncategorized\/how-to-take-advantage-of-lower-opr.html"},"modified":"2026-03-26T16:02:07","modified_gmt":"2026-03-26T08:02:07","slug":"how-to-take-advantage-of-lower-opr","status":"publish","type":"post","link":"https:\/\/www.comparehero.my\/blog\/economy-markets\/how-to-take-advantage-of-lower-opr.html","title":{"rendered":"How Malaysians Can Take Advantage Of The Lower Overnight Policy Rate (OPR)"},"content":{"rendered":"\n

Bank Negara Malaysia (BNM) announced another Overnight Rate Policy (OPR) cut, making it the fourth reduction for 2020 on 7th July 2020. As a Malaysian, how can this low interest affect you in the best way? Here are 6 savvy ways on how you can take advantage of this lower OPR.<\/strong><\/p> \n

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If you\u2019ve been following our local financial news closely, you\u2019d probably have seen words like \u201cOPR\u201d and \u201ccut interest rates\u201d popping up in headlines. If you\u2019re lost, we\u2019ll fill you in.<\/p> \n

Just recently, Bank Negara Malaysia (BNM) announced that they had cut the overnight policy rate (OPR) for the fourth time this year, now to a record low of 1.75% – the lowest since 2004. As a move to stimulate the economy in a COVID-19 world, OCBC Treasury Research economist Wellian Wiranto said to The Edge Markets<\/a> that this is \u201ca testament of just how unprecedented our current situation has been\u201d.<\/p> \n

If none of the above makes cents<\/del> sense, don\u2019t worry – we\u2019ll break it down for you.<\/p> \n

What is Overnight Policy Rate (OPR) and why does it matter to you?<\/h2> \n

If any part of your life has anything at all to do with a bank, then yes – the OPR affects you<\/strong>.<\/p> \n

If you\u2019re a borrower, you\u2019ll know that all your loans come with an interest rate. These rates are dependent on the Overnight Policy Rate (OPR) set by Bank Negara. If the OPR increases, so will interest rates. If the OPR decreases, so will interest rates.<\/b><\/p> \n

Increasing or decreasing the OPR will immediately increase or decrease the cost of borrowing for banks, and thus, will lead to a chain effect\u2026 and therein lies the opportunity for consumers like you and me.<\/p> \n

For borrowers, it\u2019s a time to enjoy. One of the biggest benefits of a low interest is that debt servicing charges are lowered significantly<\/b>, likewise with loan instalments with variable interest rate loans. Basically, this means that if you buy a big ticket purchase that requires financing help from the bank, you\u2019ll get a much better rate when the OPR is low.<\/p> \n

However, it\u2019s not-so-good news for those who depend on the interest on their savings\/current accounts and fixed deposits. With the lowered interest rate, the existing money in the bank will not grow like before (until the OPR increases).<\/b><\/p> \n

(TL;DR) OPR rate drop = lower interest rates = cheaper loans that encourage you to borrow from banks, also lower ROI from existing money in banks (e.g. savings, FD)<\/i><\/p> \n

Okay, so why did Bank Negara lower the OPR?<\/h2> \n

As you know, we\u2019re one of the many countries impacted by the COVID-19 pandemic. With everyone holding back, a lower interest is designed to encourage the public to spend during these difficult times.<\/b> By spending more, we’ll stimulate the local economy and hopefully recover fast enough so that the country doesn\u2019t go into a recession.<\/p> \n

In a conversation with Focus Malaysia<\/a>, Sunway University Business School economics Professor Dr Yeah Kim Leng said that now, consumer sentiment is weak and people and businesses tend to hold back more. When people hold themselves back from spending, money doesn\u2019t move or grow.<\/p> \n

With a lowered interest rate, people would be more likely to jump on the opportunity to borrow from banks to finance the things they need – investments, a new home, a new car, so on and so forth.<\/p> \n

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\u201cSo, from a consumer\u2019s perspective, a rate cut makes things easier on our pockets. […] Typically, a lower rate will encourage those who are creditworthy to use more debt for spending or investments.\u201d – Professor Dr Yeah Kim Leng to Focus Malaysia<\/p> \n<\/blockquote> \n

How to take advantage of low OPR rate in Malaysia<\/h2> \n

So now that we roughly know how the OPR affects and benefits us as consumers, what would some of the immediate ways we can use to take advantage of the low OPR? Let\u2019s start with the most obvious:<\/p> \n

1. Buy a home – or your second, third, fourth\u2026<\/h3> \n

Thinking of buying a home, whether for yourself or as an investment? Now would be a great time to do so.<\/p> \n

Unless you have cold, hard cash to pay off the cost of a new property, you\u2019ll need to borrow from banks. As a lower OPR would cause local banks to adjust their lending base rate (BLR) and base financing rate (BFR) accordingly, now would be a great time to secure a better deal with the bank so you can maximise your spending or<\/i> have more to save.<\/b><\/p> \n

Just to add to that, Jin Ooi, a team leader in real estate at Kith & Kin<\/a>, previously told us that he\u2019s already seeing and expecting a 20% decline in property prices at most as the market shifts into a buyer\u2019s market as a result of COVID-19.<\/p> \n

Besides, the government has also thrown in incentives for budding homebuyers as part of their PENJANA stimulus package as we head into an economic recovery – stamp duty exemption being one of them.<\/p> \n

With so many benefits coming in at once, it does feel like the right time to invest in a new home – considering you have the financial capabilities, of course. By the way, we\u2019ve covered the topic of property buying tips in this New Normal previously – read it in full here<\/a>.<\/p> \n

2. Consider getting a vehicle (if you need one)<\/h3> \n

While the returns of getting a new vehicle is\u2026 well\u2026 nonexistent, you may want to consider financing a car for the same reasons we highlighted in the point above. With a lowered interest rate, you can secure yourself a better repayment deal with the bank.<\/b><\/p> \n

This is great if you were already thinking of getting a new vehicle, but never really took the leap. However, if you\u2019re thinking of getting one just for the sake of taking advantage of a lower interest rate, you may want to think twice. Unlike property, the value of vehicles depreciates the second you buy it, so you\u2019ll never be able to make back what you put in.<\/p> \n

3. Refinance your current loans<\/h3> \n

So, let\u2019s say you don\u2019t have any plans to buy a new home\u2026 can you use the OPR cut to help you with your current mortgage? In an article from iProperty<\/a>, we learn that as an existing borrower, you\u2019ll get to benefit from:<\/p> \n