To stabilise the economy and manage the rising cost of goods and services, Malaysia’s central bank, Bank Negara Malaysia (BNM), has raised the Overnight Policy Rate (OPR) from 2.75% to 3%. Around 49% of lower-income households in Malaysia, who earn between RM3,000 and RM5,000 per month and have floating-rate loans, will experience higher borrowing costs and financial challenges. Thus, it is crucial for us to reassess and adjust our financial strategies to effectively manage the adverse effects of the OPR hike.
💡 Related: What is the OPR?
Here are 4 practical steps to better manage your finances during this time.
|Review your existing loans||Prioritise your debt repayments||Reassess savings & investments|
If you have a floating-rate home loan, it’s important to assess how the OPR hike affects your monthly repayments, as the bigger the loan, the bigger the impact. To find the best repayment options for your current financial situation and risk profile, consult your bank. They can provide options such as retaining the same instalment amount temporarily, but it’s important to understand the potential implications on borrowing costs, loan tenure, and other factors.
|Floating-rate Loan: A type of loan where the interest rate can change based on a benchmark, which may be the Base Lending Rate (BLR) or the Base Rate (BR). This can result in potential fluctuations in monthly payments throughout the loan term.|
💡 Related: Monthly Repayment Calculator (Home Loan)
Pay off high-interest debt, such as credit card balances or personal loans, as soon as possible so that you can reduce your financial burden and minimise the impact of increased borrowing costs over time.
💡 Related: Credit Cards 101
With the recent increases in interest rates, fixed deposits now offer higher returns (between 2% – 5%), which can benefit savers of all ages, including retirees who rely on interest income to cover living expenses. So, assess the potential impact of higher interest rates on different assets for long-term investment portfolios and adjust your approach accordingly to maximise returns.
If you’re struggling with loan payments, contact your bank or the Credit Counselling and Debt Management Agency (AKPK) at https://www.akpk.org.my/ for support options. For personalised guidance on navigating the impact of this recent OPR hike on your finances, consult a licensed financial advisor. You can find one at https://smartfinance.my, for instance.