BNM has reduced the Overnight Policy Rate! (OPR) In case you still did not know, our interest rate is now lowest since 2010. OPR has been reduced by Bank Negara Malaysia (BNM) again today by 50 basis points. The rate is currently at 2 percent. This is a decision by its Monetary Policy Committee today and the reasons include a deteriorating business condition because of COVID-19 pandemic.

BNM in a statement said, “With the decision today, the OPR has been reduced by a total of 100 basis points, complementing other monetary and financial measures by Bank Negara Malaysia as well as fiscal measures this year. Together, these measures will cushion the economic impact on businesses and households and support the improvement in economic activity.” With this latest cut, do you know how much ‘savings’ will you get from your RM500,000 home loan?

Take a look at the two images below. One is BEFORE. The one right after is after this latest reduction and assuming banks will follow the same reduction to their borrowers.

So, on a monthly basis, for someone who has a RM500,000 loan at 30-year repayment term, the savings is RM2,174 – RM2,045 = RM129 per month. This savings will enable the person to drink 10 cups of Freshly Brewed black coffee from any of the major coffee chains. Divided into 30 days, that’s a cup every 3 days. Not bad at all. Haha.

Of course, if the savings is used for roti canai x 2 plus a glass of teh tarik, then it’s enough for one full month of breakfast! So, yeah, can be considered a major savings. At the same time however, it’s bad news for those with FD expiring soon. These FDs would have have a rate which is 0.5% lower too. So, what will happen to someone with RM200,000 in the bank? Well, they may have been earning around 3.25% and this will soon become 2.75%.

RM200,000 x 0.5% (reduction) = RM1,000 per year and that’s around RM83 per month. This is still more than enough for daily roti canai x 1 and a glass of teh tarik I think. Okay, wishing everyone the best for this latest cut. Remember to manage the risks if you decided that it’s best to invest some of the FDs into the stock market for example. Happy understanding.

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