Increase OPR affects Higher Car Loan Interest?

For the fourth time this year, the hike in the Overnight Policy Rate (OPR) has affected loan interest rates.

The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to increase the OPR by 25 basis points (0.25%) to 2.75%, according to a statement BNM shared on November 3, 2022.

The reason being has pointed out to the economic situation that is happening globally. BNM reported that OPR has increased due to global financial positions, restrictions, and rising costs in China.

People in China line up for a Covid-19 test in Chengdu, Sichuan on September 2, 2022 (Photo: EPA-EFE)

The dire impacts of these challenges overshadowed the beneficial effects of improved labour market conditions and the full reopening of most sectors and international borders.

More than that, inflation lingered longer than projected due to strong demand, a tight labour market, and high commodity prices despite improvements in global supply chain circumstances, as shared by Berita Harian.

RHB Investment Bank Bhd analyst Jim Lim Khai Xhiang also highlighted that a high OPR will cause interest rates for hire purchase loans to be high as well, making them more expensive and reducing the affordability of more people.

"Therefore, we believe that banks will be more cautious in the approval of hire purchase loans.

"This also has the potential to lead to a decrease in the approval rate of hire-purchase loans," he added.

Source: Berita Harian