THE EFFECT OF AN OVERNIGHT POLICY RATE (OPR) HIKE ON HOME LOAN IN MALAYSIA

Abstract

Bank Negara Malaysia (BNM) has employed numerous monetary policies to reduce inflation and ensure financial stability. It includes the change in the Overnight Policy Rate (OPR), which is the benchmark interest rate at which banks borrow and lend cash overnight. The purpose of this research was to explore the implementation of OPR and the effect of OPR hike towards home loans. This was achieved through a qualitative research design involving interviews with representatives (bankers) from Bank Negara Malaysia as well as conventional and Islamic banks. The results revealed that OPR implementation is conducted by Bank Negara Malaysia through the Monetary Policy Committee (MPC), which is in charge of developing policies for conducting monetary activities. While the OPR hike inflicts an impact on the interest rates of home loans, statistics from BNM showed an increase of home loan borrowers during the third quarter of this year compared to the second quarter across both conventional and Islamic banks. These findings offer critical insights into the effects of OPR increase on Malaysian home loans. Therefore, financial institutions should establish risk management measures while simultaneously providing home buyers with reasonable and accessible financing choices.