Bank Negara Malaysia (BNM) had raised the OPR by 25 basis points (bps) to 2% at its third monetary policy committee (MPC) meeting in May, lifting it from a record low of 1.75% where it had languished for nearly two years.
The MPC is scheduled to meet again today and tomorrow (July 5 and 6) and research firm Moody’s Analytics expects it to raise the OPR by another 25 bps to 2.25%.
National House Buyers Association secretary-general Chang Kim Loong said another hike in the interest rate would increase the financial burden on house buyers who are servicing their home loans.
“Any increase in the OPR is likely to raise the interest rate for borrowings, such as housing loans,” he told FMT.
Chang calculated that an increase of 0.25% in the OPR for a RM400,000 housing loan with a term of 30 years would likely raise the monthly repayment by RM55.
“However, this may be different for those with a shorter tenure remaining in their current housing loan,” he said.
He said this would make potential home buyers more cautious about buying property.
“The increase in interest rates does not only mean that the borrowing cost will increase, but prices of other goods and services could also rise as businesses try to pass on such increases to the consumers,” he said.
Chang advised aspiring house buyers to evaluate the economic conditions and their financial position if they decide to purchase any property this year, saying: “(House buyers) should buy properties within budget and still be able to maintain a minimum lifestyle and also have some savings for emergencies.”
The National Property Information Centre’s property market snapshot for the first quarter of this year (Q1 2022) shows residential property overhang of 35,592 units valued at RM22.45 billion.
Universiti Malaya economist Goh Lim Thye expressed surprised at the proposal for another OPR hike this year, given that many Malaysians are struggling to keep up with inflation.
“Raising interest rates would make more sense if the economy is overheating and demand is high. However, the existing inflation is primarily caused by supply disruptions. Thus, raising the OPR will not solve the problem,” he told FMT.
Instead, he said, the government should find ways to increase supply and work on improving Malaysia’s attractiveness as a destination for investors and travellers.
“There are other ways to strengthen the ringgit. Perhaps policymakers should consider ways to attract foreign investors or visitors to Malaysia to boost the ringgit’s demand without increasing the interest rate,” he added.