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Impact on interest rates of COVID-19 lockdowns and Caravan Finance

If you’re considering applying for finance to purchase a caravan in the immediate or near future you may be wondering how the current and any future lockdowns may impact lending interest rates. With areas of both NSW and Victoria both under lockdown at the same time and being the country’s major economic hubs, the consequences for the national economy are likely to be significant. To address many of the queries that our customers may have on how these circumstances may impact caravan finance interest rates, we cover off how lending rates are determined.

Triggers for Rate Changes

The RBA (Reserve Bank of Australia) is responsible for setting the official cash rate which in turn determines what lending rates the banks and finance companies set for their various loans. The bank board meets on the first Tuesday of every month with the exception of January, to decide if the official cash rate should be increased or cut. Since making the last rate cut in November 2020 the Board has kept rates on hold at 0.1%.

Following the July 2021 meeting, the RBA Governor Dr Philip Lowe, outlined in the usual statement, the Board’s insights, reasoning and outlook. The statement repeated the same key points that the RBA has been saying for many months. That is that they are awaiting unemployment to be sustained at below 5% and that inflation is sustained in the range of 2% to 3%. More info here.

Unemployment figures have defied the predictions and forecasts of both Government and many analysts despite the effects of COVID-19 on the economy. The national economy bounced back well following 2 months of a technical recession in 2020 and employment quickly picked up.

The latest unemployment figures were released in mid-July while Greater Sydney and its surroundings were in the first weeks of lockdown. The unemployment figure has dropped to 4.9% but that is based on pre-lockdown activity. On announcing such a good outcome the Treasurer Josh Frydenberg would usually be extremely upbeat. But in this case, with 12 million Australians in lockdown, the mood was far more cautious and subdued in commenting on the result. Cautious about the knowledge that the Sydney lockdown could potentially push the figure back up through July.

While the unemployment figure is nearing the range indicated by the RBA to trigger a rate rise, the other key indicator, inflation is not in range. Inflation currently sits in the 1% range. In order to trigger a rise in interest rates, the RBA has stated it is looking at both indicators.

Some analysts have been calling for the RBA to raise interest rates to stall the rising home prices in key housing markets. While the RBA has stated that they will be monitoring the housing market, at this stage, an interest rate rise is not being considered.

Dr Lowe has stated that the bank was not expecting rates to rise until around 2024. Despite the RBA’s decisions, some banks and lenders have reportedly moved on to increasing their own rates for home loans. We remind caravan finance applicants that home mortgage interest rates are differentiated from consumer finance loans such as caravans. Home loans are based on much longer loan terms than caravan loans and as such, lenders need to make decisions much further into the future.

Caravan Finance Interest Rates

If you notice a lender, even your own bank, making changes to home mortgage rates, don’t immediately think that may mean a change to caravan finance rates on any caravan loan you are planning. With our most popular caravan loan, the Secured Caravan Loan, we arrange loans based on a fixed interest rate. But while home mortgage rates may only be fixed for a portion of the overall home loan term, our caravan finance rates are fixed for the entire loan term.

Refer to our Caravan Loan Lender Comparison Table to compare our current low fixed interest rates with other lenders. For those planning a caravan purchase, simply enter the amount of your preferred caravan and preferred loan term to see an estimated loan repayment displayed. You can easily compare the repayments across all the banks and lenders we have included in this lending resource.

If a caravan loan is arranged at the current low-interest rate, the rate and the repayment will remain fixed for the entire fixed term of the caravan loan. Our fixed interest rates apply to pre-approved and post-purchase caravan loans.

For customers that have existing caravan loans based on a fixed interest rate, both your rate and your repayment will remain fixed for the full term. If your own circumstances have been impacted by lockdown and you are unable to meet your loan repayments, contact your lender to discuss what support you can access.

COVID-19 Outlook and Caravan Finance

The current expansive and extensive lockdown restrictions in Greater Sydney, especially the 14-day pause on construction, will no doubt have a significant impact on the economy. However, any impact would not necessarily be expected to flow into the consumer finance interest rate area. The economic fallout from the current lockdown may influence the RBA’s rate decisions but it would be extremely unlikely to trigger a further cut. It would be expected that rates would continue unchanged in the near future.

For a quote on a specific caravan loan and confirmation of the interest rate we can achieve for your loan, please speak with one of our Jade Caravan Finance consultants. Alternatively, feel free to utilise our caravan loan calculator to estimate potential repayments.

Call 1300 000 003 to discuss lending with a Jade Caravan Finance consultant

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.

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