When bills outweigh income: Civil servants lament hike in OPR

Norazizan Yahya had been serving as a secondary school teacher in Johor for three years when she decided to purchase a car well within her means with a repayment period of nine years.

At that time, she felt she was financially stable and that she would be able to manage the monthly instalments.

Norazizan started repaying the loan in January 2020, about three months before the movement control order was implemented to curb the spread of Covid-19.

Although there were government aid and relief efforts in place, such as bank loan moratoriums, she continued paying the monthly car instalment of RM485 as her salary as a teacher was not affected. 

After the pandemic, however, Norazizan began feeling financially "suffocated" due to the increase in the overnight policy rate (OPR) a few months ago.

Most recently, the monthly instalment for her three-year-old Perodua Bezza car changed, increasing once again when Bank Negara Malaysia (BNM) announced a 25 basis point increase in the OPR to 3.00%.

In the past, her monthly instalments rose as high as RM545. Her most recent communication with her bank put it at RM533. 

Norazizan and her husband have both been affected by the increase in their monthly loan commitments despite the fact that their salaries as teachers have increased. She said that the salary increments had become meaningless as their monthly loan commitments had also increased. They are also affected by the price fluctuation of goods.

She said she has discussed with her husband about cancelling the loan, adding however that there are many hurdles from the bank. She also said the loan had become a burden even though she previously felt financially capable. 

Her hope is that there will be no further increases in the near future. 

Norazizan is one of millions of bank borrowers throughout the country affected by the increase in OPR, which has resulted in an increase in monthly payments of household debts. Many individuals have taken to social media to express their financial difficulties due to the hike in OPR.

Meanwhile, a Grade 44 government employee known as Sahibullah who only rents and does not have a home loan is also facing problems due to the increase in the OPR. 

He and his wife have been renting a fully furnished condominium unit in Presint 15 for a year and four months at a monthly rental of RM1,350.

However, in June, the landlord asked for an additional RM200 in monthly rent due to the increase in loan payments, which was not part of the agreement they signed. If they cancel the contract, their deposit of more than RM4,000 will be forfeited. They now feel trapped and do not know what to do.

Further hikes ahead?

Lee Heng Guie, the executive director of the Socio-Economic Research Centre, said that the increase in the OPR was already expected as the country's economy continues to recover and approaches the pre-pandemic state.

Speaking to MalaysiaNow, he expects the rate to remain steady this year once it reaches a "sufficient" level. However, he does not rule out the possibility of further increases, which would depend on the observations and risk assessments made by Bank Negara.

According to Lee, OPR hikes must be carried out in tandem with the country's economic situation, and the rate of increase is also determined by taking into account the country's inflation rate.

"The ups and downs of the OPR are not arbitrary and are freely determined by Bank Negara's Monetary Policy Committee (MPC) without government interference," he told MalaysiaNow.

"Malaysia's OPR hikes are not as aggressive as some other countries' due to controlled inflation rates caused by subsidies."

Furthermore, Lee said that the increase in the OPR would also provide "breathing space" in the event that the country faces a crisis again, in which case the rate could be reduced.

He added that the reason for previously lowering the rate was to stimulate the economy by encouraging people to spend.

"If the OPR remains low and Malaysia faces another crisis, Bank Negara will not have any room left to lower the rate.

"The next MPC meeting will take place in early July. Whether the OPR will remain unchanged or increase will be announced on that date," he added.