Bank Negara raises OPR again from 0.25% to 2.5% – third increase this year; expect car loans to be more expensive

The Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) has decided to raise the key overnight rate (OPR) again, this time by another 25 basis points (0.25%) to 2 .5%. This is the third time the OPR has been increased this year, with the two previous hikes – each registering a 0.25% increase – occurring on July 6 and May 11.

In a official release, BNM said inflationary pressures remained elevated due to high commodity prices and tight labor markets, despite the continued easing of global supply chain conditions. “Therefore, central banks should continue to adjust their monetary policies, some at a faster pace, to reduce inflationary pressures,” he added.

Year-to-date headline inflation is currently averaging 2.8% and BNM says it is expected to peak in the third quarter of 2022 before moderating thereafter. Meanwhile, core inflation, as measured by core inflation, is expected to average closer to the upper end of the 2-3% forecast range this year.

As stated earlier, an increase in the OPR will impact a bank’s interest rate for borrowings. This could lead to higher hire-purchase rates, making it more expensive for car buyers. More than that, banks may be more cautious when it comes to approving loans, as historical data shows a correlation between OPR and the average auto loan approval rate – higher OPR, lower rate of lower approval.

If you recently made a reservation for a new car and decided to take out a loan to finance it, were you able to get your loan approved? What was your chosen model and the interest rate that was offered to you? Share your experience in the comments below.

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