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New Straits Times

Lower OPR brings RM864 annual relief to homeowners

KUALA LUMPUR: A 25-basis-point reduction in the Overnight Policy Rate (OPR) to 2.75 per cent is expected to ease the financial burden on homebuyers with floating-rate mortgages, says the Muslim Real Estate Consultants Association of Malaysia. Its president Idzwan Izuddin Shah Ishak said that local banks' floating interest rates were closely linked to the OPR through the Base Rate (BR) or Standardised Base Rate (SBR). "If the OPR is reduced by 0.25 per cent, the BR or SBR generally follows suit. As a result, the interest charged on loans will also decrease within weeks of Bank Negara Malaysia's announcement," he told Sinar Harian. He said that for a 30-year mortgage of RM500,000, a 0.25 per cent cut could reduce the monthly instalment by around RM72. "At present, the average interest rate for such a loan is about 4 per cent, which translates to a monthly repayment of RM2,387. After the OPR reduction, this could drop to approximately RM2,315 — a monthly saving of RM72 or RM864 a year." According to him, as the BR or SBR decreases in tandem with the OPR, floating interest rates fall, resulting in lower monthly payments. Borrowers might also opt to maintain their current repayments in order to shorten the loan tenure, he added. However, Idzwan said that fixed-rate loans would not see immediate changes, as rates are only adjusted during repricing at maturity. He said that a low-OPR environment could prompt banks to offer more attractive refinancing options. Lower borrowing costs, he added, were expected to stimulate demand over the next six to 12 months, particularly among first-time buyers and upgraders. "The reduction in financing costs will likely encourage more property purchases. BIMB Research has projected that heightened consumer activity could boost GDP by 0.2 per cent, bringing growth to around 4.6 per cent," Idzwan said. He said that house prices were likely to remain stable, with moderate increases anticipated in the affordable housing segment.