What happens when OPR increases? The real impact on us.
I believe in continuously monitoring the country’s interest rates, and sometimes I will monitor US interest rates.
As we all know, the US interest rate will affect the world that includes us, including Malaysia. So, whatever happens there, it will eventually impact here too.
In my 20s, I don’t care about interest rates, maybe because I’m naive or not financially savvy.
In my 40s, I understand the importance of interest rates, especially on my housing loan account and deposit account.
When BNM talked about the increase in OPR from 1.75% to 2.00%, I knew that it would increase my housing loan interest rates and, eventually, my instalment.
Starting next couple of months, I’ll need to pay more.
So, before the increase, I was paying an instalment of RM1879 per month. And now have to pay RM1970 per month starting 1st July 2022.
That is about RM1970-1879=RM91 difference per month.
In order for the contract tenure to be fulfilled within the agreeable contract, which may be 30 or 35 years, the bank has to increase the instalment or another option; they remain the instalment and extend the tenure.
How do I know how much the increase is?
Typically, the bank will send out notices to their client. That can be by regular mail, email or notification on online banking.
I received mine through email, which is so convenient when you register an email with your bank.
If you haven’t received any of the notices, reach out to the bank in any way you can.
You do not want to miss out on the actual payment. Why?
For instance, they can charge a late interest on the uncollected amount.
Secondly, they can say you have overdue in your instalment payment, which is not a good thing.
It will affect your record within the bank and maybe the CCRIS report too.
If you missed out twice on instalments and more than 60 days, the bank has the right to charge higher interest rates to penalise the account holder.
So, I hope these three reasons are good enough for you to find out about your new instalment.
Other Good Thing About Interest Rate Increases
Interest rate increases are not all bad, though. It also means that the deposit account will increase, like your saving or Fixed deposit account.
The fixed deposit interest rates will increase too and increase your passive income.
So, for people who like to save, this is good for them.
HOME LOAN TIPS:
However, if you are a Fixed deposit depositor and you happen to have a Semi-Flexi or Full Flexi home loan account.
I’d 100 per cent encourage you to put the fixed deposit money into your Semi-Flexi or Full Flexi home loan account.
Semi-Flexi or Full Flexi home loan account is a unique home loan account that allows you to put down extra money in the home loan account and save interest.
It also has a feature that allows for withdrawing the money back if you need it.
And the best part, we know that home loan interest rates will always be higher than fixed deposit interest rates. Always.
That is just how the bank makes money.
The bank takes your money, money that you put in the fixed deposit, and gives you maybe a 1.90% interest. Let said, this money is RM100,000.
Then the bank takes this RM100,000 and lends it out to another person with 3.40% interest.
The bank makes about 3.40%-1.90% = 1.50% gross profit. And because the banking industry is so big and the lending figures are gigantic, the profit is enormous even though a small percentage.
That is why the banking industry makes so much money even during this recession and pandemic.
As consumers, we, too, have to be innovative and grab any opportunity to save on interest.
Let’s say you have RM100,000 now.
And the option is either putting the RM100,000 on your fixed deposit account, with the interest of 1.90%, you might earn RM100,000 x 1.90% = RM1900 per year
In your Semi-Flexi or Full Flexi home loan account, with the interest of 3.40%, you might save RM3400 per year.
Which one will you choose?
I will always go for the second one.
Put in Semi-Flexi or Full Flexi home loan account.
I hope you can relate to what I’m writing and if you have any home loan questions feel free to reach out at +6012-6946746.
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