Economist: Refinancing loans can help mitigate impact

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PETALING JAYA: Refinancing loans is a way for the public to mitigate the impact, provided the last rate is lower than the initial rate, says an economist.

Dr Yeah Kim Leng of Sunway University said that to save even more, the public could also opt for fixed rate loans offered by financial institutions.

However, he said one should seek professional advice from loan officers at their respective banks while “seeking the institutions’ best deals”.

“If the interest loan can be converted from a floating rate to a fixed rate, they can go for it. But, generally, it depends on the initial conditions (of the loan). Therefore, it is important to get an assessment from financial advisors and get their opinion on whether refinancing is beneficial or not,” Yeah said.

“Borrowers should also have a strong repayment history to build their creditworthiness and bargaining power to be offered better financing rates.”

He said readjusting rates to an “appropriate level” would be able to grow the economy without triggering inflation.

“Rising interest rates will dampen consumption and investment, but if the level remains low and ‘accommodative’, the gradual increase will not hurt overall investment and consumer spending.

“When the interest rate is at an appropriate level, the economy will continue to grow without overheating or triggering inflation,” he added.

Bank Negara Malaysia raised its OPR by 25 basis points (bps) to 2.0% on Wednesday.

Malaysia’s policy rate has been pegged at 1.75% since July 2020, having hit that historic low after the central bank cut it by 125 basis points since the start of the Covid-19 pandemic at the start of the pandemic. of this year.

Yeah explained that following the announcement, borrowers’ monthly repayments would increase by 0.25%.

“As an illustration for a 10-year loan, the increase in loan service varies from RM12 per month for a loan amount of RM100,000 to RM60 for a loan of RM500,000.

“In short, borrowers will have to budget for slightly higher debt service while savers will benefit from an equivalent increase in deposit rates.”

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