PETALING JAYA: Homeowners are welcoming the Overnight Policy Rate (OPR) cut and the reduced interest it would bring to their housing loans, but they believe that it would only serve as a limited relief to the rising cost of living.
Many say they will continue to practise caution and financial discipline.
For 32-year-old regional learning and development manager Heshwinder Oon Chee Eng, with the lower OPR, he will channel more disposable income into his savings.
“I will save the additional money. I divide my finances into savings, fixed and variable costs, and daily spending.
“These don’t fluctuate much month to month, so it’s nice to allocate a bit more to savings,” he said.
Despite the benefits, Oon remains cautious about future investments, particularly in property.
“With the uncertainty over the past five years, from Covid-19 to geopolitical tensions and market volatility, I’m not confident about taking on another large financial commitment like buying a new property,” he said.
Oon added that any financial gains from the OPR cut are effectively cancelled out by the recent expansion of the Sales and Service Tax (SST), which has made essential items more expensive.
“The expansion of the SST on everyday household items will increase costs and would probably reduce the benefit from the lower OPR, leaving little room for financial improvement,” he said.
On Wednesday, Bank Negara announced the reduction of the OPR by 25 basis points to 2.75% at its July Monetary Policy Committee meeting, marking its first adjustment rate since May 2023.
For Wan Muhammad Rifa’at Rosli, 33, the OPR rate cut is a welcome breather amid rising living expenses.
“It really helps as costs are climbing, especially groceries, school fees and electricity bills. A lower OPR makes my housing loan repayments a bit more manageable,” the credit consultant said.
Wan Muhammad said he plans to use the additional savings to ease other financial burdens.
“I’ll be spending some of it and using the rest to settle other debts. It gives me a bit more breathing space,” he said.
Lee Xiao Jin, a key account manager in corporate sales, said while the lower OPR would reduce her monthly mortgage payments, it does not dramatically change her financial approach.
“Even saving RM100 a month, which adds up to RM1,200 a year, is not insignificant. It can enhance your lifestyle, but it’s not life changing,” she said.
With her home loan being her only major financial commitment, Lee, 31, plans to invest the extra funds in shares or save them in a fixed deposit.
However, she is not planning any major financial moves just yet.
“I don’t think the OPR drop is permanent; I’d rather avoid taking on new risks,” she said.
A 40-year-old engineer, who wants to be known as Rahman, said he values extra savings.
“I’ll use whatever I save to pay off other debts or build up my savings. Money is tight these days; I can’t afford to splurge,” he said.
Meanwhile, economics professor Dr Chung Tin Fah of HELP University noted that the OPR drop is good news for borrowers and will directly influence the Standardised Base Rate (SBR), which is the reference rate for most floating-rate loans.
“When the OPR is revised, banks must adjust the SBR by the same amount within seven working days.
“However, while the SBR is directly linked to the OPR, individual banks may reflect different effective rates due to varying business or funding costs,” he said.
Chung added that although borrowers can expect lower loan repayments, this does not necessarily translate into a significant reduction in the overall cost of living.
“Paying less on loans is helpful but the rising cost of living is driven by multiple factors, such as the reduction in subsidies and tax charges.
“Lower interest rates also tend to encourage borrowing, which can lead to higher household debt levels over time.
“The overall effectiveness of rate cuts in managing debt needs careful assessment,” he said.
