Miichael Yeoh

Tag: interest rate

  • BNM Maintain OPR at 3% – Updated 9th May

    BNM Maintain OPR at 3% – Updated 9th May

    Bank Negara Malaysia (BNM) has announced today (9th May 2024) that the Overnight Policy Rate (OPR) will remain steady at 3%. This rate has remained unchanged since May 2023, marking a year of consistent monetary policy.

    The monetary policy meets six times annually to deliberate on the OPR.

    Source: BNM

    Looking ahead , there is uncertainty surrounding whether the OPR will stay at 3% or increase further. Historically, the highest OPR since April 2015 was 3.50%, and the lowest was 1.75% in July 2020 during the COVID-19 pandemic. Typically, changes in the OPR are made in increments of 25 basis points (0.25%).

    As for the likelihood of an OPR increase this year, it appears unlikely that there will be a reduction in the near future. Instead, the OPR will either hold steady or increase depending on several factors:

    1. EPF Withdrawals: Starting May 11, 2024, contributors to the Employees Provident Fund (EPF) can withdraw from Account 3 at any time, potentially leading to RM25 billion (around 1.3% of GDP) in withdrawals. This could result in increased demand-driven inflation.
    2. Civil Service Salary Hike: There may be a raise in civil service salaries by over 13% beginning in December, which could also contribute to inflationary pressures.
    3. Fuel Subsidy Rationalization: Implementation of fuel subsidy rationalization could occur in 2025 or earlier, which may further increase inflation risk.

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    Given these factors, my prediction is that the OPR is likely to remain unchanged at 3% this year, but it could increase in 2025 due to inflationary pressures. This would allow BNM to maintain stability in the economy while also addressing any potential inflation concerns.

    From the Desk of Miichael Yeoh

  • 8 Strategies for Paying Off Your Home Loan Faster

    8 Strategies for Paying Off Your Home Loan Faster

    Without a doubt, your mortgage represents one of the most significant financial commitments you’ll undertake. Over its lifespan, the interest paid to the bank alone can skyrocket into tens of thousands. Consider this: by adhering to a 30-year home loan term, you may ultimately shell out twice the original loan amount in total.

    Did you know that within the first five years of a 30-year loan, you’re likely to reduce only about 7% of the principal? Even by the 20th year, you might still be grappling with less than half. It’s high time to reclaim control over your loan and expedite its repayment to save substantial sums in interest.

    Gone are the days of rigid loan structures prevalent from the 1960s to the 1990s. Today, borrowers have access to a plethora of tools and flexible bank policies, enabling them to slash down loan tenures.

    The sooner you bid farewell to your home loan, the sooner you’ll inch closer to retirement and debt-free living. While myriad methods exist to accelerate repayment, not all may be a perfect fit for your situation. It’s imperative to conduct thorough research and select the strategies best aligned with your needs.

    Here are some actionable ways to expedite home loan repayment:

    1. Making Extra Payments: Witness the magic unfold by utilizing a mortgage calculator to see how even modest additional monthly payments can drastically reduce interest and hasten home loan repayment. Remember, every dollar directed towards the principal shrinks the interest burden and speeds up loan clearance
    2. Refinance: Take advantage of prevailing lower interest rates by refinancing your loan. Use a mortgage calculator to gauge potential interest savings, but don’t forget to factor in associated costs like penalties and legal fees.
    3. Negotiate Interest Rate Adjustments: Keep a keen eye on interest rate fluctuations and consider negotiating with your bank for a reduction. Maintaining current installment amounts despite rate reductions can substantially reduce repayment years
    4. Utilize Flexi Mortgages: Explore flexible mortgage options like the Flexi Mortgage or Money Merge Account, where daily interest calculations and account consolidation accelerate principal reduction, thus shortening loan tenure.
    5. Interest Rate Adjustments: Strategize responses to fluctuating interest rates by either increasing monthly installments to maintain repayment duration or maintaining installments to reduce repayment years.
    6. EPF Withdrawals: Tap into your EPF Account II to swiftly reduce principal and expedite loan repayment. This can even be arranged on a monthly basis for added convenience. In Malaysia it is called EPF or Employee Provident Fund. Its a retirement saving account.
    7. Continuous Monitoring and Adjustment: Regularly monitor your loan progress and financial situation, adjusting strategies as needed to optimize repayment efficiency.
    8. Bi-Weekly Payments: Divide your monthly installment into bi-weekly payments, effectively making 13 monthly payments annually. This simple adjustment can shave off at least four years from a typical 30-year loan term, although availability may vary by region. Please take note that not every country has this package.

    By diligently implementing these strategies, you can significantly alleviate the burden of your home loan and pave the way towards financial freedom.

    From the desk of Miichael Yeoh