How the OPR is determined and why it affects us

Free Malaysia Today

FMT takes a closer look at the overnight policy rate and why the average person should pay attention to it.  Read More:   Laporan Lanjut:   Free Malaysia Today is an independent, bi-lingual news portal with a focus on Malaysian current affairs.    Subscribe to our channel - http://bit.ly/2Qo08ry   ------------------------------------------------------------------------------------------------------------------------------------------------------ Check us out at https://www.freemalaysiatoday.com Follow FMT on Facebook: http://bit.ly/2Rn6xEV Follow FMT on Dailymotion: https://bit.ly/2WGITHM Follow FMT on Twitter: http://bit.ly/2OCwH8a  Follow FMT on Instagram: https://bit.ly/2OKJbc6 Follow FMT on TikTok : https://bit.ly/3cpbWKK Follow FMT Telegram - https://bit.ly/2VUfOrv Follow FMT LinkedIn - https://bit.ly/3B1e8lN Follow FMT Lifestyle on Instagram: https://bit.ly/39dBDbe ------------------------------------------------------------------------------------------------------------------------------------------------------ Download FMT News App: Google Play – http://bit.ly/2YSuV46 App Store – https://apple.co/2HNH7gZ Huawei AppGallery - https://bit.ly/2D2OpNP  #FMTNews #OPR #CentralBank #Mortage

Transcript

00:00 Savings, mortgages, and the cost of living.

00:04 Whether you end up paying more or less for these expenses

00:07 has a lot to do with the overnight policy rate, or OPR.

00:12 You hear about it a lot.

00:13 Every few months, Bank Negara will announce if Malaysia's OPR is going up, down, or remain unchanged.

00:21 Right now, the OPR stands at 3%.

00:24 But what exactly is the OPR?

00:27 Simply put, the OPR is the rate at which banks lend money to each other for extremely short periods.

00:33 This rate is set by the central bank.

00:36 So why should you care?

00:38 If the OPR goes up, banks will raise their interest rates on loans and mortgages

00:43 as it now costs them more to borrow money.

00:46 Assuming the monthly repayment is Rp. 700,

00:51 but maybe increase the OPR from 3% to 5%,

00:57 they might probably need to pay back Rp. 770.

01:02 This also means that people are likely to spend less

01:05 as they have to fork out more to service their loans.

01:09 This in turn would be bad news for businesses.

01:12 Jobs may also be harder to come by.

01:16 It will lead to recession because no expansion in businesses,

01:20 meaning to say people will not employ.

01:23 But we have a lot of unemployment problems.

01:27 On the flip side, if the OPR is too low,

01:30 it might be a sign of an impending asset bubble.

01:34 Low interest rates attract investors to pour money into real estate or stocks for higher returns,

01:39 pushing prices to unaffordable levels.

01:43 You see, the average person should fear prolonged periods of low interest rates

01:49 because they generate inflation and asset bubbles,

01:53 which eventually provoke financial crisis.

01:56 In the end, it was too low interest rates that created the asset bubble that burst in 2008

02:04 and also the one that generated the 2001 dotcom bubble.

02:11 Understanding the OPR can help you navigate your finances.

02:15 Today, the central bank is expected to announce whether the OPR will remain at 3% or go up.

02:23 Whatever their decision is, it will likely have an impact on you.

02:27 Amira Hooda and Danish Raja Riza, FMT News.

02:32 [MUSIC PLAYING]

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