BI Rate Up to 5.25 Percent: What Is the Ideal Mortgage Instalment From Salary?

JAKARTA — The rise in Bank Indonesia’s policy rate (BI Rate) to 5.25 per cent once again affects households’ calculations when buying a home via a mortgage (KPR). Higher interest rates tend to push monthly instalments higher, making the share of income allocated to housing payments a key concern for prospective borrowers. In a rising rate environment, questions about what percentage of salary is ideal for a KPR instalment become more relevant.

Several financial guidelines indicate the safe cap for housing payments is around 28 per cent of gross monthly income. This rule, known as the 28/36 rule, suggests that housing expenditures including mortgage instalments should not exceed 28 per cent of gross monthly income, while total debt payments should not exceed 36 per cent of income. For example, someone earning Rp 10 million per month before tax would have an ideal housing instalment around Rp 2.8 million per month. Investopedia notes that many lenders use the 28/36 rule to assess borrowers’ creditworthiness.

In practice, banks assess the debt-to-income ratio (DTI) before approving a KPR. DTI is the ratio of total monthly debt obligations to gross monthly income. The higher the ratio, the greater the risk of default in the lender’s assessment.

In KPR calculations, housing expenses are not limited to principal and interest; other costs such as taxes, home insurance, and even community fees are often included in housing expenditure components. Therefore, a rise in the policy rate such as the BI Rate becomes a key factor shaping monthly instalments.

The BI Rate increase to 5.25 per cent pushes up banks’ cost of funds. In such a scenario, lending rates, including for mortgages, may also rise, especially for floating-rate loans.