Purchasing a RV with caravan finance is not a process that many people will have the need to do on many occasions. So when the time comes, it is quite normal for many to have questions around the loan inclusions and especially to do with the interest rate. Interest rates are one of the hottest topics in the media and for many Australians at the moment as a result of the RBA decisions since April 2020.
Far more than is usual, every address by RBA Governor Philip Lowe seems to make mainstream news coverage. Coverage of such speeches is usually confined to the finance pages. But lately we’re hearing Dr Lowe’s comments in main news bulletins. When individuals only catch the headlines and not the full context, it can have the potential to lead to confusion.
A recent speech delivered at a business group was reported with comments that rates could ‘see-saw’ in coming times. A comment which be confusing for those applying for say caravan finance or considering purchasing a new RV with finance. Many RV buyers may be extremely familiar with car finance and home mortgages but may never have applied for caravan finance previously. There are differences between caravan loans and home loans, especially in regard to interest rates.
Understanding how caravan finance interest rates are set and their relevance to the cash rate as set by the RBA may assist buyers in sourcing a loan that best suits their requirements.
Australia’s Official Cash Rate
As part of its remit under law and as part of setting Australia’s Monetary Policy, the Reserve Bank of Australia (RBA)has the responsibility to set the official cash rate. The central bank of most countries have this task. The cash rate is not an interest rate that applies to consumer loans or business finance . It is the interest rate which applies to bank borrowings on an overnight basis. Essentially a wholesale rate you could say. But the cash rate does form a foundation or starting point from which lenders will set their own interest rates. In that sense, the cash rate does have significance to caravan finance.
The RBA slashed the cash rate significantly as part of COVID stimulus measures and is now currently normalising the rate now that the economy has bounced back from the pandemic issues. As that bounce back also came with a surge in inflation, the RBA is using cash rate rises to address inflation.
As most people will know, the RBA Board has increased the cash rate every month since May and has said that more rises will be expected. The next rise is due at the Board’s meeting on the first Tuesday in December.
In a recent speech the RBA Governor, Philip Lowe, reiterated earlier comments that the Board was not on a set pathway in regard to rate changes. He said that the Board could return to the larger 0.5% rises or just leave rates unchanged, depending on the data and circumstances at that time. Hence the possible see-sawing commentary which followed that speech.
How Caravan Finance Interest Rates are Set
Banks, finance companies, brokers such as Jade Caravan Finance and other non-bank lenders will use the cash rate as a basis for setting their own interest rates. Each lender will be guided by its own analysts with their own forecasts for the economy and take into account their own costs when setting rates.
Some lenders may opt to increase their rates in different markets prior to RBA announcements due to their own forecasts. Some sectors may not see regular rises due to RBA decisions, while others such as the home loan market will see almost immediate changes.
Also factored into the rates will be the level of interest each has to operate within a certain lending sector. You may notice that interest rates do vary across different loan types – home, car, caravan and others. Due to the individual aspects associated with setting interest rates, you will also notice variations within each market, including with Caravan Finance Rates.
As we are specialists in the RV finance market, we focus on sourcing the cheapest rates. Note that, the rates that lenders advertise, unless they state to the contrary, will be for new goods (caravans) and for finance applicants that have a good credit rating.
Individual Caravan Finance Rate Offers
With that general overview covered, we will address the key question that many may have – if finance is sourced now, will they face interest rate rises as the RBA announces further increases?
That is a very viable question as many will have seen their home loan rates and repayments change every time the RBA raises rates. Rest assured, that does not have to occur with caravan finance. It depends on the type of interest rate which is attached to the caravan finance – fixed or variable.
If caravan finance is secured with a fixed interest rate, the interest rate should not change over the loan term even when the RBA increases the cash rate. We source our Secured Caravan Finance with a fixed interest rate which remains fixed for the entire finance term. The same rate and the same repayments that are offered and agreed to when the loan is established will remain unchanged over the entire number of years of the loan.
Secured Caravan Finance with a fixed interest rate is the most popular form of finance for new caravans and will suit most buyers.
Where a caravan loan has a variable interest rate, then it may change in line with RBA decisions. Some lenders will offer personal loans with a variable rate for the purchase of caravans and RVs. When comparing lenders and loans, buyers should be aware of the type of interest rate and what may be expected over the life of the loan.
So to avoid changes to the caravan finance and be able to enjoy many years of travelling without worrying about the loan repayments changing, select caravan finance with a fixed rate which is fixed for the full loan term.
Contact Jade Caravan Finance 1300 000 003 for fixed interest rate caravan finance to avoid changes to repayments from RBA decisions.
DISCLAIMER: THE DETAILS AND INFORMATION IN THIS CONTENT ARE PREPARED AND PRESENTED PURELY FOR INFORMATION AND NOT INTENDED IN ANY WAY AS THE SOLE SOURCE OF FINANCIAL ADVICE FOR CARAVAN PURCHASING. IF ADDITIONAL FINANCIAL ADVICE IS REQUIRED, READERS SHOULD REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, PRODUCT DESCRIPTION VARIATIONS, OR OTHER MISREPRESENTATIONS OF INFORMATION AS PRESENTED.