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With the latest cut in Bank Negara’s overnight policy rate to 2% (read the news here) following the recent 75 basis point reduction, this certainly signals more challenging times to come in the local economy. The world’s nightmare of the global financial crisis is far from over and I personally think Malaysia is now beginning to see the potential effect. Whilst the earlier denial of a recession in the country was not quite the right thing to do, at least Bank Negara is making sense in quickly adjusting interest rates to help give buffer to the economy.
What will lower interest rates mean for people on the street like you and me? It means cheaper loans from financial institutions. That’s great news. On the other side of the coin, it also means a lower savings rate for your deposits. Most people have withdrew from investing in the stock market temporarily, and many may have decided to put their money where they thought were safer investing haven – fixed deposits. Now with the OPR being slashed, the banks will subsequently be bringing down the interests offered on deposits too.
I guess we can’t win all the games at hand. I actually don’t mind earning lower interests from deposits and in return have access to cheaper loans and being able to pay off the loan in shorter periods due to the lower interest costs on the loans. It is in fact an advantage that should be taken off to work out how soon a loan like mortgage or personal loan can be paid off so that you can be debt free. Are you planning to do so?
