Bank Negara decision on OPR hike still worries many

IPOH: The decision by Bank Negara Malaysia to raise the overnight policy rate by 25 basis points to 3% on May 3 continues to draw differing reactions, though with many readily pointing to the downside.

This is the first hike since November 2022 when the central bank raised the benchmark lending rate by 100 basis points.

Loh Ban Ho, 52, a property and housing developer, said the increase would mean higher borrowing costs, which could discourage spending and investment.

Loh, who is also the Real Estate and Housing Developers Association’s Perak branch deputy chairman, said this would also reduce consumer confidence as people would be less willing to take on debt and spend money.

“With lower economic growth, businesses are less likely to invest in expansion and consumers are less likely to spend money.

“There is a chance of increased unemployment, as businesses may reduce hiring or lay off workers to cut costs.

“There is a possibility that such an increase could lead to a slowdown in the property market, as higher mortgage rates make it more difficult for people to buy homes,” he added.

Loh also said it might be important for the government to avoid further interest rate increases to prevent a recession in Malaysia.

“Instead, the government could consider other policy measures to support the economy, such as a fiscal stimulus or targeted support for businesses and workers in sectors that are particularly affected by the (Covid-19) pandemic.

“Ultimately, the best course of action will depend on a range of factors, including the severity of the pandemic and the specific economic challenges facing Malaysia at this time,” he added.

Entrepreneur Steven Gill, 45, said the higher OPR meant interest rates would be higher so fewer people would be able to afford a housing loan, which is the biggest investment in one’s life.

He said some other people who could not meet the monthly payment would now have to take a longer loan duration.

“For example, those planning to settle their loan in 25 years would have to revise it to, say, 30 years now.

“Buyers may have to lower their expectations, where those planning on purchasing a RM1mil property may have to look at RM800,000 properties to meet the loan repayment criteria,” he said.

On the plus side, lawyer P. Mangaleswary, 67, said the higher OPR would also mean higher interest rates for savings and fixed deposit accounts, thus encouraging some to save more and spend less.

She said the OPR hike might help check the continuing rise in the price of goods.

Mangaleswary, who is president of non-governmental organisation Ipoh Family Wellness Club, said people would definitely need to pay more in monthly loan instalments, and the increase was going to be hard on many who were already struggling with the cost of living.

“I am hoping that the government will soon come up with the wage increase that it has been assuring the people of.

“Though the hike in OPR to 3% signals that our economy is getting more resilient, we are still not out of the woods.

“Later in the year, there may be an economic slowdown in tandem with what is forecast in many other countries, and thus, it is hoped that there will be no more OPR hikes for this year,” she added.

Ipoh City Watch president Prof Richard Ng said the OPR was as low as 1.75% during the early part of the Covid-19 pandemic, and an increase was necessary when the economy picked up in order to control too much spending and borrowing, which could cause inflation.

However, he said any change in the OPR would definitely have an impact on ordinary Malaysians and investors.

“On the other hand, an increase in the OPR means it is time to put our money into fixed deposits.

“With technology such as the Internet and social media, people can now easily check for the best interest rates offered by banks.

“During the (early part of the) pandemic, fixed deposit rates ranged between 1.25% and 1.5%, but today, the rates are between 2.0% and 4.25%,” he said, while acknowledging that many people would also be affected with higher monthly instalments, while the repayment period could also become longer.

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