Generally, when an economy does very well, the interest rates are raised. The central bank does not want the economy to get overheated, does not want too much speculative activities (people simply buy properties, stocks and everything) and does not want inflation to up too much. (way faster than salary increment for example). Then, why did the International Monetary Fund (IMF) forced us to increase the interest rates when the economy was suffering from the ASEAN financial crisis? My opinion? It was a flawed advice because it wanted to ‘kill’ all the uncompetitive companies. Well, with double digit interest rates, it will just kill everyone, not just the uncompetitive ones. Fortunately, Malaysia did NOT follow and we reduced the rates instead. We recovered. Now, the market is expecting the rates to be cut and says Bank Negara Malaysia (BNM) has such a flexibility.
Article in themalaysianreserve.com here. Kenanga Investment Bank Bhd (Kenanga Research) said that Bank Negara Malaysia (BNM) has more flexibility to cut its Overnight Policy Rate (OPR) by 25 basis points (bps) now due to lower inflation rate estimates and dovish stance of major central banks. (Dovish stance meant that there is no longer any clear direction to keep increasing rates like the earlier stance by Federal Reserve in the U.S.) It said, “We believe that inflation would likely hit the lower end of our forecast range of 1%-1.5% in 2019 (2018: 1%).” It also foresees inflation may be rising after the floating of domestic fuel prices in July. According to the Department of Statistics Malaysia chief statistician Datuk Seri Dr Mohd Uzir Mahidin, the increase in the overall index (inflation) was driven by the index of housing, water, electricity, gas and other fuels (+2%), education (+1.3%), food and non-alcoholic beverages (+1.1%), and restaurant and hotels (+1%). Do read here for more reference. Article in themalaysianreserve.com here.
I think a lower rate will be welcomed by all the existing home buyers as well as potential home buyers. By the way, the current rates are already on the lower end of the interest rate range yeah. In 1984, a typical interest rate for a mortgage is 14 percent. Yeah, FOURTEEN. That’s 2.5 times higher than today. In 1999, it was in double digits. So, the BEST TIME to buy a property if it’s based on interest rate looks like now. Just buy when we found something great for us. Check a bit on the generally transacted prices around the area to make sure it’s not overpriced. Use brickz.my as a guide. Lower rates are also known as growth accommodative stance too. Happy following and for those waiting for lower rates before buying, happy waiting too.
<Featured Image is courtesy of Stock Photos from thodonal88>
Article written and edited by Charles. News article summarised by Dina Batrisyia.
Next suggested article: Deflation better than inflation, right?