Against a backdrop of an estimated 16 million Australians under some form of lockdown restrictions and thousands isolating following COVID-19 tests, the scheduled RBA monthly board meeting proceeded on 3 August. Jade Caravan Finance provides an update on the August RBA Statement on interest rates and the impact on caravan finance.
In addition to the monthly meeting to discuss interest rates and monetary policy, in the same week, the Bank released its Quarterly Statement on Monetary Policy and the Governor Philip Lowe made an appearance before the Economics Committee of the House of Representatives. The appearance was, as so many other business people had to do that week, was via teleconference.
In one of the most serious periods of the pandemic in Australia, some may have been looking to the RBA for direct individual relief or support. But delivering specific financial support to individuals and businesses is not the role of the RBA. Its role is to deliver support through stimulus measures via monetary policy which is continuing. However, as Dr Lowe pointed out in his address to the Economics Committee, the RBA is the banker to the Australian Government. As such, the bank has been working closely with Services Australia to ensure the disaster payments are flowing as quickly as possible to individuals.
RBA Statements and Decisions
At the August meeting the RBA board held the official cash rate at 0.1% and confirmed its plan to continue with its bond buying policy as previously communicated. Decisions which continued the same theme as the past few months and were not surprising.
In the explanatory, accompanying statement, the current outbreaks and lockdowns were noted and expected to result in a fall in GDP in the September quarter. It was noted that the economy had been bouncing back in a very positive way prior to the current virus outbreaks. As previous experience had demonstrated, the economy had recovered well once outbreaks were contained and restrictions lifted. It was noted that the vaccination program would assist recovery.
It was noted that unemployment figures had been positive but it would be expected that that the current virus situation would impact that trend. But that the unemployment rate would be expected in the 4.5% range in 2022 and around 4% in 2023.
The Board repeated its commitment to current bond buying policy with a flexible approach in regard to the health situation and resulting economic conditions.
The Quarterly Statement on Monetary Policy released on 6 August, essentially explains and outlines the rationale behind RBA decisions over the period. The key themes were addressed by Governor Lowe in his appearance before the Economics Committee. These included the faster than expected bounce back of the economy; the impact of outbreaks; slow wages growth; the expectation of a bounce back after restrictions are lifted; and the substantial support provided by the RBA monetary policy to the economy.
Outlook for Interest Rates
Borrowers would no doubt be looking for the key take-outs from the RBA statements in respect to their current loans and future financing plans. That is – what will happen with interest rates?
The RBA stated that the economic outlook was uncertain and dependent on the health situation. The targets which would trigger a decision by the bank to lift rates were once again stated as lower unemployment and inflation sustained in the 2% to 3% range. This was clearly clarified in the statement that not simply edging over 2% inflation but being sustained well into the 2% range over several quarters was required. Currently inflation sits at 1.75%
The RBA again stated their outlook was that interest rates would not be raised until 2024 and provided the scenario as to a timeframe for inflation and unemployment targets to be achieved.
Impact on Caravan Finance Rates
It should be highlighted that the RBA sets the official cash rate which is essentially the cost of borrowings between Australian lenders. The rate which forms the bottom line, starting point from which individual banks and lenders then set the caravan loan interest rates they are prepared to offer in their lending sectors.
Lenders sourcing funding from international rather than Australian sources may be subject to higher rates and costs to acquire their funds. This may result in some lenders increasing their own lending rates. Increases in rates by some lenders may also be seen in some loan categories due to a change in the level of confidence in a sector or for other reasons.
To circumvent any potential effects of such activity on our caravan finance rates, Jade Caravan Finance has accreditations with a diverse and extensive selection of banks and non-bank lenders. This provides us with the ability to consistently achieve the cheapest rates achievable for individual loan applications.
Different lenders have varying approaches to loan sectors as you can easily see on our Lender Interest Rate Comparison Calculator. It details the types of loan products offered for caravan purchases and the current interest rate offered by a range of lenders.
Note that our Secured Caravan Loan attracts a fixed interest rate. Be assured that this fixed rate would apply to repayments across the entire loan term. With terms available for up to 7 years, a caravan loan secured at current low rates would not be impacted by any rise in interest rates in 2024 or beyond.
The next meeting of the RBA Board is scheduled for the first Tuesday in September. This is just following the current deadline for Greater Sydney to exit lockdown on 28 August. The effect of the lockdown on the economy and unemployment should be known and no doubt will be reflected in the Board’s statement at that time.
In the meantime, we continue to support customers with new caravan finance and provide refinancing services for those looking to vary their current commitments.
Contact Jade Caravan Finance on 1300 000 003 for a quote on caravan finance.
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.
