When the Reserve Bank announced a cut to the official cash rate early in 2020 as part of its initial response to the effects of COVID-19 on the Australian economy, many analysts and observers thought that historic low rate of 0.25% would be as low as it would go. Others thought the RBA could do more. With our fixation on achieving the cheapest interest rates for our customers, Jade Finance stays across all fluctuations in rates and has kept a close eye on where things might go especially in the wake of the delayed Federal Budget announced in early October.
When the RBA held their scheduled meeting in November, while many Australians were concentrating on the form guide for the Melbourne Cup, Jade was looking after your loan interests and awaiting the RBA announcement. The RBA Governor, Philip Lowe, announced a cut of 15 basis points to place the official cash rate at a new historic low of 0.1%.
So what does this rate cut mean to your loan or your loan plans? We’re covering off on the main points to assist with your planning.
Explanation: RBA and Interest Rates
The RBA controls what is known as the cash rate or the official interest rate. This is not the ‘official’ interest rate that applies to business equipment and vehicle finance and consumer loans for such goods as cars, boat, bikes and caravans. It is the rate that banks pay for their borrowers either from each other or from the RBA. It determines how much lenders will pay for the funds that they need to then lend to people and businesses like you.
So when you hear interest rates at 0.1%, slow down, Jade Finance will not be able to secure you a loan at a 0.1% interest rate. But it can be a positive sign for lower interest rates to flow on through our lending panel and onto our customers.
Once the RBA announces these rate cuts, the ball is then passed onto the banks and lenders to pass on the rate cuts to their customers. At times in the past, some have been heavily criticised for not passing on the full interest rate cut. In this case, some banks and lenders have passed on some cuts to some of their customers.
‘Some’ has to be noted. Usually rate cuts apply predominantly to home mortgage holders rather than consumer goods loans and business asset finance such as we arrange at Jade Finance. That has been the case. Some lenders have passed on the cuts to some mortgage holders (not Chattel Mortgage holders) and some business loans.
Impact on Your Loan
At Jade Finance, we arrange the majority of our loans at a fixed interest rate. This is the accepted format for loans such as boats, car finance, bikes and caravans and for business finance for vehicles, trucks and equipment. Some unsecured loans, both consumer and business, may be arranged at a variable interest rate.
We focus on achieving a cheap fixed interest rate equipment finance for a good reason. It allows our customers to plan their personal finances or their business cash flow in the knowledge and with the certainty that their loan repayments won’t change over the term of their loan.
So if you currently have a fixed interest rate loan or finance through Jade Finance, we do not anticipate that there will be any change to the interest rate charged on your loan or to your repayments.
Any fluctuations in interest rates by our lending sources on the various categories of loans that we offer, are reflected in adjustments that we make to our advertised current interest rate. This is a general guide only as all loan applications are addressed on an individual basis. The lender assesses your application in regard to the interest rate they will offer you and your Jade consultant negotiates with them to get you the lowest rate.
- No action is required for our existing consumer loan customers as a result of the RBA rate cuts.
- Those considering a bike, car, caravan loans or boat, historic low interest conditions are set to be in place for some time so now could be right for you to put your plans into action.
- Business with existing finance on motor vehicles, trucks and equipment which was arranged at much higher interest rates may consider refinancing. Jade Finance handles refinance and can source you a quote to consider.
- Business customers with general business loans, overdrafts and some other specialist finance may be impacted by the rate change. To discuss your particular loan, contact Jade or your lender.
- Businesses considering new asset acquisitions to take advantage of the low interest rates and IAWO and other budget measures should contact Jade for a finance quote.
We’ll stay across developments in interest rates and other conditions which may impact lending and post updates as information becomes available.
To discuss finance and loans for both business and consumer purchases please contact us and speak with one of our Jade Finance consultants. Call 1300 000 008
DISCLAIMER: THE INFORMATION, OPINIONS, DATA, POLICIES, PRODUCT SPECIFICATIONS AND OTHER CONTENT CONTAINED AND EXPRESSED IN THIS ARTICLE HAS BEEN OBTAINED THROUGH RECOGNISED REPUTABLE SOURCES, PRIMARILY IN THE PUBLIC DOMAIN. LIABILITY IS NOT ACCEPTED FOR ANY ERRORS OR MISINTERPRETATION OF SAID CONTENT. THIS CONTENT IS NOT INTENDED OR PROVIDED AS THE SOLE SOURCE OF INFORMATION OR AS SPECIFIC FINANCIAL ADVICE IN REGARD TO MAKING DECISIONS BY INDIVIDUALS OR BUSINESSES. THOSE THAT CONSIDER THAT THEY NEED PROFESSIONAL ADVICE SHOULD REFER TO A FINANCIAL ADVISOR.