Alter in the OPR will bring out a chain of events that affect the Base Lending Rate (BLR) and Base Rate (BR), short-term interest rates, fixed deposit rate, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services which is the micro and macro factors on the economic.
Bank Negara Malaysia’s (BNM) decision to cut the overnight policy rate (OPR) by 25 basis points to 3% is expected to have a positive impact on borrowers and the property sector. It will caused banks to reduce the Base Rate(BR) in order to maintain the competitiveness in the market. When banks decrease their BR, the cost of loans will be lower, making current borrowers and property buyers the winner.
For those who have saved money in the bank will lose as fixed deposit rates will decline in line with BLR. People will prefer to use the FD saving to do some long-term or short-term investment in property rather than save the money in bank to enjoy the lower rate. Nevertheless, now is a good time for borrowers to look for banks offering better interest rates and to refinance loans, but it still depends on whether the existing loans are subject to a lock-in period.
Lower OPR would spur economic growth and home ownership. This will ease the burden on property purchasers servicing their home loans as their monthly repayments for the loans will be lower and they will have extra money in hand to spend. This reduction also means that more property purchasers will qualify for home loans and it will especially benefit first-time homebuyers. The reduction is also good for property developers who have high gearing or
plan to borrow future funding from banks as it will reduce the cost of borrowing. Therefore, with lower monthly repayments and everything else remaining the same, the amount of people qualifying for mortgages should increase.
Source from: Theedgeproperty.com