There is a change coming in the finance sector. Something that hasn’t happened for around 12 years. Interest rates are set for an increase. Interest rates have been a popular subject in the media over the past few months as the inflation rate has increased and many economists and others have ‘suggested’ that the RBA make their move and increase the official cash rate. At the April Board meeting, the RBA kept the rate on hold at the historically low level of 0.1%. But a change in the Board’s tone has been noted and many are tipping a rate rise in June. So what does all this mean for those seeking boat, bike, caravan and car loans?
The RBA dropped the cash rate to the current 0.1% in November 2020 and has kept it on hold since then. The last time the rate was actually increased was in 2010. But the targets for unemployment and inflation that the RBA as repeatedly stated are close to if not already being reached.
This data and the absence of the comment about ‘adopting patience’ in the RBA April Monetary Statement, all point towards an imminent rate rise. This overview of the rates scenario is aimed at shedding light on the impact on consumer finance - boat, bike, caravan and car loans moving forward. We also cover off on a number of ways that those seeking loans can still achieve a cost-effective outcome after a rate increase comes into effect.
RBA Rate Decision
The RBA Board meets monthly to make a decision on the cash rate. This is a bank-to-bank lending rate but determines the interest rates offered across lending markets. Individual lenders set their rates according to their own criteria and costs.
At the scheduled April 2022 meeting the Board kept the rate on hold, despite widespread calls for an increase. In announcing the rate decision, the RBA Governor, Mr Philip Lowe, noted the resilience of the Australian economy; pick up in business investment and consumer spending; and that inflation would increase as a result of prices for petrol and other goods.
The central forecast is stated for unemployment to decrease further from the 4% current rate during 2022. Then remain at the lower rate in next year. The Board forecasts additional increases in the growth of wages but those will be gradual.
As is usual, no specific timing was provided as to when the RBA may announce a rate rise. But it has said it will be assessing the additional information and data available shortly. The Board is seeking evidence that the current inflation scenario is sustainable in the 2-3% range, which is the target previously indicated.
Timeframe for Change
While the RBA did not give a date for rate rise, the major banks all concur that they think this will happen at the Board’s June meeting. What those seeking loans at some point moving forward should be mindful of, is that there may not be only 1 single rate rise. Some analysts predict the central bank may move on rates several times over say a six month period.
For those with fixed interest rate loans, there will be no change to those current loans. Those with variable interest rate loans may see an increase in their rate and hence repayments as a result of a rate rise.
From our perspective, Jade Finance is completely committed to continuing to secure better interest rates and cheap loans across our portfolio. Our banks and lenders will make their individual decisions and moves in response to any rate rise by the RBA. Loans applied for after any rise will be quoted on current rates offered. Our consultants will source the cheapest rate from across our many lenders.
If you’re wondering exactly how much difference a rate rise means – head to our loan calculators or interest rate comparisons. Play around with changing the rate by a small increment and see how that may change the car or boat loan repayment.
Tips for Securing Cost-effective Loans
We have been stressing the message for some time in our posts, that those intending to purchase goods with finance should act asap as a rate rise was looking highly possible this year. But for some, especially new car buyers, the stock supply situation has thwarted their efforts to purchase new vehicles. The same situation has been occurring in other markets also.
Consider these few ideas to ensure you achieve the cheapest loans:-
- Reconsider buying choices. If your preferred vehicle won’t be available for 6-12 months, then it could save you money on your loan if you go to option 2 on your buying list. Look around for new vehicles that are available for immediate delivery.
- Keep credit rating in good order. The lowest interest rates advertised are traditionally for new goods and for applicants that have a good credit score. Keep your credit score in the good range to ensure you are in a position to be offered the best interest rate loan.
- Concentrate on loan repayments rather than interest rates. Interest rates in conjunction with the term of the loan determine the repayments. But the monthly payment can be what determines an individual’s budget. Set a target for the loan payments you would like and discuss this with one of our Jade Finance consultants. We can work towards achieving that target through negotiating on loan terms with our lenders. You may also consider reducing the total amount borrowed by paying a deposit. That would also reduce repayments.
- Take full advantage of our finance broker services to assist you in securing the cheapest loan offer.
Whatever you’re purchasing plans and timeframe, our consultants are readily available to assist you in securing cheap car, bike, caravan and boat loans.
Contact Jade Finance 1300 000 008 for cheap consumer loans
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.