Most Australians will have some form of credit or loan whether it be a home loan, car loan, boat loan, caravan loan, or other personal loan. If you do, then chances are you have been listening to the coverage of interest rates lately. Specifically, the increasing prospect of a rate rise this year rather than around 2024, the timing previously flagged by the RBA. You might be listening but fully understanding what it’s all about, what’s causing it, and how it could affect your loans, including used caravan finance, could be a concern to you. You’re not alone! If considering buying a new RV with a loan, grasping the implications and meaning of a rate rise and effect it may have on your caravan finance can be helpful with the buying and finance process.
A better understanding of how interest rates are set and what causes rates to be increased, especially under the current economic scenario, can especially assist in timing the purchase and making the loan selection to avoid the added cost that a rate rise can present.
We provide a brief summary of some of the current issues which are contributing to the prospects of an impending interest rate rise, the effect such a rise may have on caravan finance and how to minimise the impact on a new caravan loan.
Issues Fuelling Rate Rise Prospects
The release of the latest economic data plus events happening on the world stage have led to an increase in rate rise talk in the media. On the overseas front, the United States Central Bank, referred to as the Fed (Federal Reserve) increased the key interest rate for the first time since the start of the pandemic. The US is experiencing a significant increase in inflation, much larger than in Australia. But economists in Australia have said that the RBA is extremely likely to follow the US with a rate rise in the near future.
Closer to home and the release of the February unemployment represents good news for the economy but not so good news for those considering finance. The RBA has stated that an unemployment level possibly below 4% was a target for considering a rate rise. This combined with sustained inflation in the 2-3% range.
In February the unemployment rate has again dropped to 4%, the lowest in many years. This is getting very close to RBA target territory. However, Stuart Robert, the Federal Minister for Employment, did point out that the unemployment rate could rise in March due to fall-out from the flood crisis. Many businesses have been lost or forced to close for extensive recovery and this may put a lot of people out of work.
Now for inflation which has been rising in Australia since the bounce back from the variant Omicron got into full swing in late 2021. Inflation is a key indicator for the RBA to lift rates. While lending is cheap such as it is with the current historic rates in place, businesses and individuals are incentivised to spend and invest with finance. This pushing up inflation. Lifting lending rates is considered a lever to temper inflationary pressures.
The pressures of costs of living in general are widespread. Fuel costs have been singled out as a major cause and the price of fuel is primarily determined by global events. The war in Ukraine is a source of concern in regard to a number of economic factors including supply chains and fuel.
These are possibly the major issues which are red flags when it comes to the RBA lifting the cash rate in 2022 rather than as far out as 2024 which had been previously indicated as a possible timing.
Rate Rise Impact on Caravan Finance
When there is a rise in the cash rate as made by the RBA, the lending market typically follows by raising interest rates. This can impact many different types of both consumer loans, including caravan loan rates, and business finance. Individual banks and lenders decide how much of a rate rise or cut they will ‘pass on’ to customers.
In general terms then, it could be expected that caravan finance interest rates from at least some of our lenders, will increase in the event of a rise in the cash rate. A higher rate of interest on a loan relates to higher repayments. To see exactly how much even a small rate rise could mean in additional caravan loan repayments use our Compare Finance Rates Calculator.
For those with an existing caravan loan, if the interest rate is at a fixed rate, the loan repayments will not change. For those with variable interest rate caravan loans, the repayments can potentially rise when rates rise.
Minimising Impact for New Caravan Loans
For those considering new caravan finance, here are a few tips to minimise rate rise effects:-
- Act quickly to secure a caravan loan at the current low rates before rates rise.
- Secure a fixed interest rate caravan loan.
- Engage Jade Caravan Finance to source your loan to ensure you secure the cheapest rated loan currently available.
- Address any credit issues to ensure you are offered the cheapest possible rate.
It now looks inevitable that the RBA will lift the cash rate this year so by expediting purchases with finance, buyers can avoid paying too much more on their caravan loan repayments.
For a caravan loan quote contact Jade Caravan Finance on 1300 000 003
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.