Finally some good news for home owners in Malaysia. The Malaysia’s Central Bank (BNM) announced on Friday the 25th of July that the Overnight Policy Rate (OPR) will remain unchanged at 3.50%. This is great news to all Malaysians as the OPR is used as a guide to the Base Lending Rate for loans in Malaysia. With the OPR remaining unchange, Malaysians can expect the interest rates for their loans and overdrafts to remain unchange as well. (The current BLR for most banks are at 6.75%)

Despite earlier market speculations that the OPR will be raised to stem the growing inflation, I am glad that Bank Negara have decided to keep the current 3.5% rate.  Most Malaysian are still reeling from the effect of the higher fuel prices as well as the rise in basic consumer goods, as such a rise in their monthly mortgage payments is the last thing anyone would want. At least now, the mortgage payment for most families remains a constant unchanged amount.

For the full BNM statement on the OPR, click here

To encourage Malaysians to have better quality of life as well as to ease the burden of owning a house, the Malaysian government has made provisions in Budget 2008 to allow the monthly withdrawals of the balance in Account II for home loan repayment.

In other words, Employee Provident Fund (EPF) contributors will now be able to make use of their Account II balances to assist them in the Monthly Home Mortgage repayments. For example, an average wage earner earning RM3,000 a month will be able to use his EPF to contribute an additional RM207 a month towards his home mortgage repayments.

To illustrate the above point further, here’s a breakdown on the calculations

Monthly Wage = RM3,000

Monthly EPF Contributions
a. Contribution from Employee (11%) = RM330
b. Contribution from Employer (12%) = RM360

Total Monthly Contribution to EPF (a.+b) = RM690

Hence, Monthly Account II allocation is RM207 (30% of the total monthly contributions)

As such, new and current home owners stand to benefit as follows:

• Qualifying for a higher Home Loan Quantum as the qualifying monthly Mortgage repayment is RM1,207 instead of RM1,000 (Based on the rule that monthly mortgage repayments should <1/3 of your monthly salary)

• Ability to purchase a property at a much higher price range. Current home owners may consider trading their current home for a bigger one

• Or for current home owners on Flexible Home Loan, using the monthly EPF witdrawals to boost the monthly repayments translates to lower interest charges and overall lower cost of ownership.

On the surface, this policy looks like another win-win policy for the people and the real estate industry. However the implementation of this policy from the EPF statutory body leaves a lot to yearn for. Read more »