Potentially lower mortgage payments in the near future

Potentially lower mortgage payments in the near future

When interest rate rises, the mortgage rates will rise in tandem. In other words, we will have to pay a higher amount every month. Then again, if seen from the longer term context, the current rates are very low. Take a look at the chart showing the interest rate movement for Malaysia across a longer period of time. We can see the rates are considered on the lower end for the past 10 years or so.

Bank Negara Malaysia’s expected decision according to reports

Article in malaymail.com The ringgit opened higher against the US dollar on Monday with anticipation of a possible overnight policy rate (OPR) cut by Bank Negara Malaysia’s (BNM) monetary policy committee (MPC) meeting on July 9, 2025, said an analyst.

Mohd Afzanizam said the OPR might be reduced by 25 basis points as heightened economic uncertainties could potentially affect the second half’s growth momentum.

“So there is a clear justification for BNM to support growth,” Mohd Afzanizam told Bernama. Do read the article in full here: Article in malaymail.com

Why do central banks reduce rates?

Central banks reduce rates when they see the economy potentially slowing down and they like to increase the potential for people to invest more. They may also reduce rates to push for a higher GDP growth too even if they did not see the economy slowing down.

When interest rate is lower, businesses may take up loans to expand their business. People may prefer to take out their money from the banks to invest into other places for higher returns. When all these happen, it will then create the need to hire more people. When more people have salaries to spend, then the economy will grow more and the cycle continues.

This is what the economics theory says and I think logically it can happen as long as all the other right steps are also taken such as government spending in the right places to spur more investments.

What happens if rates are reduced by 25 basis points or 0.25 percent?

If nothing changes, someone with a RM500,000 loan will now have an extra RM68 to spend on other things since the mortgage rates are now lowered. RM68 is not a lot actually but just to put this into perspective, every year we have about 300,000 transactions for properties here in Malaysia. RM68 x 12 months x 300,000 transactions (just for one year) means a lot of money flowing into the economy.

When everyone saves RM68 or less or more every month, this is a significant push for the local economy yeah. Then again if everyone uses that money to spend outside of Malaysia, then we will gain less from this cut in rate.

Time to think about property investment, maybe?

Please do not ask me which property is good buy yeah. Answer the reason you like to buy and then do the necessary homework. Read kopiandproperty.com for continuous tips too but I do not run any courses and I have nothing to sell to you as well; no REN tag. Some considerations to think about?

• Buying to stay? (save on rental)
• Buying to stay, do decide if you need a small place, bigger place or some place you want to stay forever… (all different choices)
• Buying to rent out (cover the mortgage interest part at least)
• Buying to rent out, who’s your target? (office people, students, tourists… all are different properties)
• Buying for capital appreciation? (only buy undervalued ones and get ready to hold while you wait for the up cycle)
• Buying because your friends are buying? (better not yeah, unless you understand the reasons they do so and you agree)
• Buying for investment since rates are lower? (good thoughts, do enough research, it’s hundreds of thousands of RM decision)

Happy deciding.

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