KUALA LUMPUR: Interest rates in Southeast Asian countries are generally rising.

On Aug 1 this year, the benchmark rate in Singapore, known as the Singapore Overnight Rate Average or SORA, was 3.674 per cent, up from 3.029 per cent on Jan 1.

Many mortgages are related to the SORA. It is based on the volume-weighted average rate of borrowing transactions in Singapore's unsecured overnight interbank SGD cash market between 8 am and 6.15 pm.

Thailand's central bank raised its policy rate for the seventh time in a row in August. The rate was hiked by 25 basis points (bps) to 2.25 per cent.

Meanwhile, Indonesia's benchmark interest rate has remained unchanged at 5.75 per cent.

Bank Negara Malaysia started raising rates before other central banks, and that kept inflation from getting as high and causing as much damage as it has in the US and Eurozone.

Whether Bank Negara raises, lowers, or leaves rates steady in 2024 will depend on how strong the economy is and how fast prices grow, said Kashif Ansari, co-founder and group chief executive officer of Juwai IQI.

"Homeowners hope the economy remains strong enough to support high employment and household income, but not so strong that Bank Negara has to raise rates and make their mortgages more expensive. Right now, we seem to be in that lucky zone," he said.

Bank Negara startled onlookers in May by raising the overnight policy rate (OPR) by 25bps from 2.75 per cent to 3.00 per cent, after pushing the pause button at Monetary Policy Committee (MPC) meetings in January and March.

This restored the OPR to its pre-pandemic level of 3.00 per cent. It maintained the OPR following the previous MPC meeting in July.

Looking back, the OPR has risen by a total of 125bps since May 2022, the quickest increase since records began, and it is working to reduce inflation and stabilise the economy.

Bank Negara raised rates four times in 2022, totaling 100bps, and then raised rates again by 25bps in May 2023.

Following its two-day MPC meeting, the central bank said on Thursday (Sept 7) that it would keep the OPR at three per cent.

The central bank said in a statement that at the present OPR level, monetary policy remains "supportive of the economy" and is consistent with the current assessment of inflation and growth expectations.

Moving forward, it is said that growth will be powered by strong domestic expenditure in the face of a challenging external environment.

Kashif said Bank Negara's decision to keep the OPR level constant has reassured the Malaysian real estate market.

"The steady OPR rate brings certainty and stability to the market. It's a good sign for housing affordability and makes it easier for developers to create new housing for Malaysians.

"The decision will reinforce the growing residential real estate market, where transactions are increasing and the property overhang is shrinking," he said.

Each time the mortgage interest rate rises by 25bps, the monthly payment increases by around RM77.

That means that for a RM500,000 loan with a 30-year term and a five per cent interest rate, monthly payments would rise from RM2,684 to RM2,761.

"In simple terms, Bank Negara's decision means housing will remain relatively affordable compared to the alternative. Homebuyers and owners won't see their mortgage payments go up. Landlords won't feel financial pressure to raise rents for their tenants.

"Looking forward, we expect Bank Negara to again leave the rate unchanged at its next meeting in November. Look around the region, and you'll see that Malaysia's inflation, economic growth, and interest rate environment are relatively good," he said.