OPR 2025: Latest updates
As of 9 July 2025, Bank Negara Malaysia (BNM) announced its latest revision to the Overnight Policy Rate (OPR), reducing it from 3.00% to 2.75%. This marks the first rate cut in two years.
Previously, BNM had maintained the OPR at 3.00% since its 25 basis point hike on 3 May 2023.
With this adjustment, the ceiling and floor rates of the OPR corridor are now set at 3.00% and 2.50%, respectively.
Overnight Policy Rate (OPR)
What is Overnight Policy Rate (OPR)?
Before we dive in deeper, let’s have a look at what OPR is all about.
The Overnight Policy Rate (OPR) is an overnight interest rate set by Bank Negara Malaysia (BNM), which determines the interest rate for financial institutions to lend funds to one another.
Depending on the bank’s lending activities as well as the customers’ deposits and withdrawals, banks have varying levels of cash reserves on a daily basis.
Thus, banks with a cash shortage often borrow from banks with larger cash reserves in order to balance the available levels of cash, which in turn ensures a stable banking system.
Why Is the OPR System in Place?
Maintaining this balance is crucial to keep financial systems functioning, as well as meet the liquidity requirements set by BNM.
To ensure banks have a steady amount of available cash, the interest rates fixed by the OPR provides a structure for monetary direction on a national scale.
Due to its significance in banking operations, the OPR can affect the economy in various ways, including employment and inflation.
What Does This Mean to Home Buyers and Businesses?
As a homebuyer or business owner, you’ll likely want to know how this rate change affects your loans.
When the OPR is higher:
- Loan costs increase, as banks will revise their interest rates.
- Housing and commercial loan interest rates also rise.
- This makes access to capital more difficult and adds pressure to existing loans.
When the OPR is lower (like now – 2.75%):
- Loan costs decrease.
- Monthly instalments become more affordable.
- Loan eligibility improves, and property demand may increase.
For example, in 2020, Malaysia recorded its lowest-ever OPR at 1.75% due to the impact of the pandemic.
This latest rate cut is seen as a proactive move to support the economy amid low inflation (around 1.2%) and slower GDP growth (approximately 4.4% in Q1 2025).
The increase in OPR results in:
1. Higher monthly installment payments
The higher interest rates make the cost of borrowing more expensive, resulting in a hike in monthly installment payments.
2. Longer loan tenure
Thanks to the increase in the monthly installment amount, the repayment period will be extended if the old sum is maintained.
Since most housing loans in Malaysia are Full Flexi Loans or Semi Flexi Loans, this means that your monthly payment will fluctuate with the rise and fall of OPR.
The chart below shows a rough idea of the changes in monthly payments:
| Loan Amount | Interest Rate 3.00% | Interest Rate 2.75% | Monthly Savings |
|---|---|---|---|
| RM500,000 | RM1,924 | RM1,846 | –RM78 |
| RM600,000 | RM2,309 | RM2,215 | –RM94 |
| RM700,000 | RM2,693 | RM2,584 | –RM109 |
*Note that this information is only for reference – interest rates and percentages vary from bank to bank. Please check with your bank for the latest updates.
Is This a Good Time To Buy a Home?
Yes, now is a buyer-friendly environment if your goal is to secure a home for own stay or as a long-term investment. The rate cut has reduced financing costs and there is a “window” of negotiation leverage before the market stabilises and potentially turns upward again.
The recent OPR cut to 2.75% creates a more favourable environment for property buyers. Lower borrowing costs mean home loans are now more affordable, reducing monthly repayments for many.
At the same time, Malaysia’s housing market remains stable, with mid-market properties (below RM500,000) continuing to attract steady demand, while some higher-end segments show more negotiability.
While inflation is low (around 1.2%) and GDP growth is expected to be moderate (~4% in 2025), this provides buyers an opportunity to secure better loan terms. Developers are also offering incentives like rebates and free legal fees, adding further value.
However, buyers should remain cautious if they are looking for short-term gains, as price growth is likely to stay modest through 2025.
Overall, this is a good time to buy a home for own stay or as a long-term investment, especially if finances are stable and the property is in a strong location.
It’s high time we start investing, so if you’re interested in getting connected with the experts in the property industry, drop us your details and we will connect you as soon as possible!
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