A one-point change moves a long home loan by hundreds of ringgit a month, and refinancing only pays when the saving outlasts the cost of switching.
Take a RM400,000 balance with 25 years left. At 4.00% the instalment is RM2,111.35. If your rate rises 1 percentage point to 5.00% the instalment becomes RM2,338.36, which is RM227.01 more a month, and if it falls to 3.00% it becomes RM1,896.85, which is RM214.50 less. If your lender keeps the instalment at RM2,111.35 after a rise to 5.00%, the loan takes about 375 months instead of 300, roughly 75 months longer. Refinancing from 5.00% to 4.00% over the same 25 years saves RM227.01 a month, so with an assumed RM8,000 of switching costs the instalment saving covers them by the 36th instalment. These are hypothetical figures, not offers or a forecast of rates.
Which rate does your home loan follow?
Bank Negara Malaysia (BNM) has kept the Overnight Policy Rate (OPR) at 2.75% since its 9 July 2025 cut, most recently on 3 September 2026. We do not forecast the next decision. What reaches your loan is your bank's reference rate plus a spread that is specific to you, so the first step is to read your letter of offer.
| Your loan | Reference rate it follows | How it relates to the OPR |
|---|---|---|
| New loan, or refinanced, from 1 August 2022 | Standardised Base Rate (SBR) plus your spread | BNM links the SBR solely to the OPR, so the SBR changes only after an OPR change. |
| Loan priced on the Base Rate (BR), from 2 January 2015 | BR plus your spread | Since 1 August 2022 the BR moves exactly in tandem with the SBR, according to BNM. |
| Loan priced on the Base Lending Rate (BLR), before 2 January 2015 | BLR, as stated in your agreement | Since 1 August 2022 the BLR also moves exactly in tandem with the SBR, according to BNM. It stays on the BLR unless refinanced. |
| Loan with a fixed rate stated in the letter of offer | No floating reference rate | Check your agreement for the fixed period and what happens when it ends. |
The spread covers things like your credit risk, the bank's costs and its profit margin, and it is the part that differs between offers. Our bank rate pages show how Maybank, CIMB and RHB have moved each reference rate, and the bank reference rates table covers the rest.
Worked example: what 1 percentage point does to RM400,000
Hypothetical balance of RM400,000 with 25 years (300 months) left, repaid by equal monthly instalments. The 4.00% is an illustration, not a current bank offer. We move it 1 point either way and assume the full 1 point reaches your rate.
| Rate | Monthly instalment | Change vs 4.00% | Interest over 300 months | Interest change vs 4.00% |
|---|---|---|---|---|
| 3.00% | RM1,896.85 | −RM214.50 | RM169,053.58 | −RM64,350.63 |
| 4.00% | RM2,111.35 | — | RM233,404.21 | — |
| 5.00% | RM2,338.36 | +RM227.01 | RM301,508.05 | +RM68,103.84 |
How the numbers are reached:
- Instalment: P × r ÷ (1 − (1 + r)−n), with P = RM400,000, r = rate ÷ 12 and n = 300. At 4.00%, r = 0.04 ÷ 12 and the instalment is RM2,111.35. Figures are rounded to the sen from unrounded values, so a lender's own figure can differ slightly.
- Interest over 300 months: 300 × instalment − RM400,000. At 4.00% that is 300 × the unrounded instalment − RM400,000 = RM233,404.21. (300 × RM2,111.35 − RM400,000 gives RM233,405.00 because the printed instalment is rounded to the sen.)
- If the lender keeps the instalment instead: after a rise to 5.00%, RM2,111.35 a month clears RM400,000 in about 375 months, which is 75 months more than 300. Whether your lender changes the instalment or the tenure depends on your agreement and its notice, so ask.
A rise costs more than the same fall saves: RM227.01 up against RM214.50 down. The hypothetical balance sits at the start of the 25 years. If the rate change happens later, the balance is lower and the effect is smaller.
Does refinancing pay? A break-even example
Refinancing means taking a new loan to repay the current one, usually at a lower rate or on different terms. Assume you owe RM400,000 at 5.00% with 25 years left, and a lender offers 4.00%. We treat RM8,000 as the one-off cost of switching. That is an assumption standing in for legal fees, stamp duty on the new loan agreement, valuation and any early-settlement charge on the current loan. Your costs will differ, so replace it with the lender's itemised quotation. We ignore the time value of money and hold both rates constant, although a floating rate may change.
| Choice | Rate | Term | Monthly instalment | Interest to pay | Interest plus switching cost |
|---|---|---|---|---|---|
| A. Stay | 5.00% | 300 months | RM2,338.36 | RM301,508.05 | RM301,508.05 |
| B. Refinance, same remaining term | 4.00% | 300 months | RM2,111.35 | RM233,404.21 | RM241,404.21 |
| C. Refinance, restart at 30 years | 4.00% | 360 months | RM1,909.66 | RM287,478.03 | RM295,478.03 |
- Simple payback for B: RM8,000 ÷ (RM2,338.36 − RM2,111.35) = RM8,000 ÷ RM227.01 = 35.24 months, so the saving has covered the cost by the 36th instalment. Over the full 300 months, B costs RM60,103.84 less in interest after the switching cost (RM301,508.05 − RM233,404.21 − RM8,000).
- C lowers the instalment most (RM428.70 below A) but its interest is RM54,073.82 higher than B's, because you borrow for 60 more months. Even so, C's interest plus cost is RM6,030.02 below A's.
- The break-even is a simple payback that counts only the instalment saving. If you might sell or settle early, ask for the settlement figure on each loan, because the lower rate also reduces what you still owe. In this example, after 30 instalments you owe RM378,583.04 on A and RM375,495.56 on B, which is RM3,087.48 less, before any exit charge.
What to ask before you refinance
- Ask for the offer in writing, with the reference rate and the spread (for example "SBR plus a stated margin") and whether the rate is floating or fixed.
- Ask for every one-off cost in a list, then add them up to get your own break-even.
- Read your current agreement for any lock-in period or early-settlement charge, and ask your current bank for a settlement figure.
- Check whether the new term restarts, and compare total interest as well as the instalment, as option C shows.
- Ask your current bank whether it will review your spread before you pay switching costs.
- Expect the new lender to run its own affordability check. Our DSR guide explains the ratio, and the home-loan comparison lists published rates by bank.
To test your own balance, rate and term, use the home-loan calculator. If you are thinking about paying the loan down faster rather than switching, the mortgage early-settlement calculator shows the interest saved.
Restarting the term when you refinance lowers the instalment but adds interest, as option C shows. For the same trade-off on a plain 30-year versus 35-year loan, see should you take a 30-year or a 35-year home loan.
The size of the loan matters as much as the rate: the home-loan down payment versus emergency fund guide shows what 10%, 15% and 20% down change on a RM500,000 purchase and how much cash each leaves in reserve.
Does my instalment change as soon as Bank Negara changes the OPR?
Not by itself. BNM sets the OPR and your bank sets its reference rate, which BNM's framework ties to the OPR. Your rate is that reference rate plus the spread in your letter of offer. Check the bank's notice for the date the new rate applies and whether your instalment or your tenure changes.
How much does a 1% rate change cost on a RM400,000 home loan?
On RM400,000 with 25 years left, moving from 4.00% to 5.00% adds RM227.01 a month, and moving from 4.00% to 3.00% cuts RM214.50 a month. It assumes the full 1 point reaches your rate.
How long does refinancing take to pay for itself?
Divide the one-off costs by the monthly saving. In our example RM8,000 ÷ RM227.01 = 35.24 months, so the instalment saving covers the costs by the 36th instalment. That is a simple payback that counts only the monthly saving. Use your own lender's itemised costs.
Calculate with your own numbers
Indicative planning only; not an offer, a quotation, financial advice or a forecast of rates. Ask your lender for a written offer with itemised costs and query any unexplained amount before you sign.
Sources
- BNM, Overnight Policy Rate decisions (OPR 2.75%, unchanged since the 9 July 2025 cut; latest decision 3 September 2026) — reviewed 2 November 2026.
- BNM, Revised Reference Rate Framework (SBR from 1 August 2022, linked solely to the OPR; BR and BLR move in tandem with the SBR) — published 11 August 2021; reviewed 2 November 2026.
- BNM, New Reference Rate Framework (Base Rate from 2 January 2015; spread above the reference rate; pre-2015 BLR loans stay on the BLR) — published 19 March 2014; reviewed 2 November 2026.
Instalment, interest and break-even figures are Kira Dulu's own calculations from the stated hypothetical inputs; the RM8,000 switching cost is an assumption, not a bank fee.