What Does an Interest Rate Hike Mean for Property Investors?

So, what does an interest rate hike mean for property investors in Malaysia? The recent increase in the Overnight Policy Rate (OPR) by Bank Negara of 25 basis points has caused a flurry amidst new property investors wondering what exactly this means for them. Basically, it means that there will be an increase of 0.25% for base lending rates (BLR), short and long term interest rates as well as fixed deposit rates. The last time Bank Negara did this was in 2014.

This increase in BLR means that your home loan interest rates will increase by just 0.25%. For a RM500,000 loan for a 30-year tenure, this 0.25% will equate to about RM74 more on your monthly repayments, or RM888 more each year (Huat ahhh?). In the grand scheme of things, it shouldn’t affect the average investor much at all. The people who will feel this most would be multi property owners who have several loans under their name. It’s nothing to be overly alarmed about unless you currently have millions upon millions of loans to pay back. You can have a look at the latest loan rates being offered by banks at imoney.my. The table below illustrates what the increase means depending on the number of RM500,000 properties a particular owner may have.

Number of RM500,000 Properties

Increase in Monthly Repayments (RM)

Overall Increase Per Year (RM)

1

74

888

3

222

2664

5

370

4440

10 740

8880

 

As you can see, even at 5 properties, the increase is only RM370 per month which shouldn’t be too much of a burden for someone who is making repayments for 5 properties to bear. It might set you back a little on your monthly earnings but it should not significantly affect your lives. If an additional RM74 is causing you major grief, perhaps you might need to reevaluate your portfolio and spending habits significantly.

If you do happen to be on the side of property investors that are over-leveraged, simply adjust your property portfolio. Consider other options that will help you cope with your property loan repayments better or increase your rental rates if your tenancy agreements are due for renewal. Worst come to worst, you may want to consider selling if you’ve already experienced some capital gains and you can’t manage holding on to more than 5 properties anymore. There are always ways to work things out, so don’t panic, evaluate your finances, keep calm and carry on investing.

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