Explainer: How the OPR cut affects your loan costs
While it may sound technical, this decision affects millions of Malaysians, especially those with existing loans or planning to take one soon.
Banks start lowering loan rates
Soon after the announcement, banks began reducing their Standardised Base Rate (SBR) and other lending rates. These base rates are used to set the interest charged on many types of loans.
When the SBR goes down, the interest on floating-rate loans, which can rise or fall over time, also drops. This means borrowers pay less each month.
Impact on housing and car loans
For homeowners with floating-rate mortgages, this cut could mean lower monthly instalments and savings in the long run. Car buyers can also benefit.
For example, under RHB Islamic Bank's variable-rate car financing, a borrower with a RM100,000 loan over nine years would have paid RM1,152 per month when the SBR was 3.00 per cent.
With the bank's fixed profit margin of 2.00 per cent added on, the total rate charged to the borrower, known as the effective rate, was 5.00 per cent.
Now that the SBR has dropped to 2.75 per cent, the effective rate falls to 4.75 per cent, and the monthly instalment becomes RM1,128.
That's a saving of RM24 a month or over RM2,500 across nine years, enough to pay for several months of fuel or insurance.
What about personal loans?
The same applies to personal financing. Some banks now offer rates as low as 5.25 per cent (SBR + 2.50 per cent) for floating-rate personal loans to government employees.
Before the OPR cut, the same loan might have carried a 5.50 per cent rate. On a RM50,000 loan over five years, that difference means paying RM945 per month instead of RM955, a total saving of RM600 over the loan period.
Why did the central bank do this?
Bank Negara made the cut to lower borrowing costs, support household spending and keep the economy growing despite global uncertainties.
For borrowers, whether it's for a home, a car, or extra cash, this move brings some relief and a good chance to review existing loans or explore better financing deals.
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