BANK Negara Malaysia (BNM) is expected to raise the overnight policy rate (OPR) once more in the coming weeks, further adding to the burden of borrowers.

The current rate of 2.75%, is expected to increase by 25 basis points to 3%.

Althought that is still below the pre-pandemic level of 3.25% as seen in March 2019, a rate hike coupled with high inflation, is worrying low-to-middle income households.

Nathan, 34, an airline technician who earns about RM4,500, is dreading the news.

He is paying RM2,000 a month in loan repaymetns for his RM450,000 home in Nilai, Negri Sembilan.

“Another rate hike is certainly not welcome but we have no control over it. Whatever the outcome, we will need to pay for it,” he said.

Nathan, who did not want to give his full name, said he has no choice but to pay or sell his home.

“Selling the property is an option but who will buy it at the current rates? Buyers are scared,” he said.

“I’m keeping my monthly expenses at a minimum but I don’t think I can cope with the rising prices as well as loan repayments.

“I may have to take up a part-time job,” he said.

The OPR sank to its lowest ever, to 1.75%, in early 2020 after the global outbreak of Covid-19.

However, last year, the rate was raised four times to reach 2.75%.

A 0.25% rate rise for a RM500,000 home loan with a 30-year tenure will increase the monthly installment payment by about RM7.

This means the borrower will pay more RM25,560 in interest over 30 years. 

Inflation

Jason, who owns a home in Seremban, said the central bank cannot keep raising rates without taking the effects of inflation into consideration.

“One cannot say the OPR is still lower than pre-pandemic levels while ignoring the prices of goods now.

“Prices have increased, loans payments are higher, but salaries have remained stagnant,” said Jason, who works as a business development manager.

He said following the four rate hikes of last year, he now has to pay RM300 more to repay his loan.

He said he needs about RM3,000 for his monthly commitments, including housing and vehicle loan payments.

He said this excludes utilities payment and property taxes.

Jason, who commutes from Sendayan to Kuala Lumpur for work, said prices in Seremban are now nearly as high as in the Klang Valley.

“I can say that the prices of food and goods in KL and Seremban are almost the same,” said the father of two.

Roslee, who runs a restaurant in Kuala Lumpur, has been hard hit by inflation.

“I’m running a business in KL and I’ve had to raise my prices because I cannot cope with the inflation.

“I have workers to pay, rent to pay and now the rate has increased. This is not only going to affect my home loan but the rent for my business premises.”

Anger at government

Roslee said business owners do not have consistent income.

He expressed his disappointment in Prime Minister Anwar Ibrahim, who recently said that the government cannot tell the central bank not to raise interest rates.

“During the election campaign, Pakatan Harapan (PH) leaders promised us the sky,” he said.

“They questioned the OPR hikes during former prime minister Ismail Sabri Yaakob’s tenure but now they are keeping quiet.

“They also said that if PH wins, they will stop chardging toll on PLUS highways. Now that PH is the main component of the unity government, why is that still not done?”  saying all those sweet promises were election gimmick.

On Monday, The Malaysian Insight reported that the middle-income earners fear a gloomy 2023 as interest rates rise. – January 14, 2023.