BANK OPR RATES ARE UP, SO ARE YOUR MONTHLY INSTALLMENTS

fig.1

Bank Negara Malaysia recently raised the overnight policy rate (OPR)[Bank jargon] for the second time by 25 basis points. That totals 50 basis points this year….so far. “Blah blah blah…” this is what many people will say when they see this. Maybe, it does not hit home for them.

What this means in layman’s terms is that cost of borrowing goes up. Examples are property loans and others that have a “floating interest rate”. This is an interest rate that is generally pegged to the OPR. To keep this as simple as possible, I will not go deeper into technicalities like Bank rates, etc.

In terms of $ & cents; like everybody else affected with these two increases; I received a notice in the mail from my bank informing me of my monthly installment increase by 15.30782%! Incredible, yes? While this hefty increase could be due to the bank’s recent exposure and not so shiny performance and “the buck stops with us”; I would prefer to focus on what we can do perhaps to reduce monthly cost increases such as these.

You can implement some or all of these:
– Going to and fro work: Pick the shortest route. Travel during non-peak hours. This helps reduce fuel expenditure.
– If your household has more than one car, use the most fuel efficient one more often.
Reduce the frequency of travelling out.
– Car-pool.
– Eat more meals at home. Cook in bulk and deep freeze. Have two or three varieties that you can alternate at each meal.
– If you have to eat out, go to one that is less expensive, not necessarily compromising on the quality of food or starving your tastebuds. I will touch more on the perception that paying more is always better in my upcoming article.
– Reduce electricity consumption: Switch off all electrical appliances when not in use. Use LED bulbs and energy saving appliances.
– Shop around for better loan / mortgage packages and switch if viable.

This list is not exhaustive.

These may not seem much in savings. If you are conscious in tracking your income and expenditure; the above measures can definitely go a long way to mitigate the rising costs of households.

fig. 2

Inflation. What about it? Very loosely put: inflation is too many people chasing after too few an item. Desperate people are willing to pay more or are forced to pay more, just to get that item. Which leads to companies coming out with “limited editions” to hike the prices up. Then, there will be 2nd, 3rd, 4th limited editions or colour specific limited editions.

We can control inflation in our own very small way by controlling our expenditure.

This is a good time, as any; to re-look into how you, we, us, can manage finances efficiently. There is a short 2 hour per day x 1 day per week x 9 week programme available in Subang Jaya, Kuala Lumpur, Malaysia; to help learn to manage finances more efficiently. (1)

NOTES
A floating interest rate is one that changes periodically, as opposed to a fixed (or unchanging) interest rate.
Floating rates are carried by credit card companies and commonly seen with mortgages.
Floating rates follow the market or track an index or another benchmark interest rate.
Floating rates are also called variable rates.

Inflation is action of inflating something or the condition of being inflated for example: the inflation of a balloon
In economics, inflation is a general increase in prices and fall in the purchasing value of money. So, policies are put in place, aimed at controlling inflation.

1. Catholic Compass
fig.1 PropSocial
fig. 2 IQI Global

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s