Finally, after months and months of speculation from economists, analysts and even some of our own lenders, the RBA has given an indication that a rise in the official cash rate is likely. Australians intending to purchase items including RVs with caravan finance and especially those with home finance will have been keen observers of developments and commentary in regard to interest rates.
The RBA Board meets monthly to make their decision around the official cash rate and at the 5 April 2022 meeting, the decision was made to leave the official rate at 0.1%. The same record low which has been in place since November 2020 and which has led to the current low lending rates. For those considering a caravan, checking out caravan loan reviews might offer insights into how these rates are benefiting buyers.
But the economic conditions are all forming to meet the targets previously indicated by the RBA as those that would trigger a rate rise. So while the April announcement was not very surprising, it will be surprising if the RBA doesn’t act in coming months. Unemployment has dropped to 4% and inflation is rising into the 2-3% target range.
In our articles over recent months we have urged those intending to purchase a caravan with finance in the near future to bring forward that decision in order to secure finance while rates are at record lows.
With a cash rate rise imminent, caravan buyers will no doubt be interested to know how the RBA April statement and its rate decisions effect caravan finance.
April RBA Board Decision
You may be thinking, if the RBA kept rates on hold at their April meeting, why is there now so much talk? The key change is in the tone of their statement in making the cash rate announcement. That change is that in previous statements over the past 12+ months, the Governor, Philip Lowe, has concluded with a comment about remaining patient and waiting for the conditions to be in line with the target.
In the April statement, there was no mention of patience. This was quickly picked up by commentators and added impetus to the conversation that a rise will come soon.
The key take-outs from the RBA Governor’s statement include:-
- Other economies have experienced much higher surges in inflation.
- Australian continues to be resilient.
- There has been an uptick in investment by business.
- There has been an increase in spending.
- The Bank’s central forecast is for the rate of unemployment to drop below 4% during 2022.
- Wage growth will be gradual.
- Increases in inflation will result from fuel and other prices.
- Interest rates on lending continue to be accommodative.
In regard to when it may raise the cash rate, the RBA said it was waiting on further evidence from economic data which would be available in the coming months. It said it would assess the evidence in making its decisions.
What now?
With the April decision done and the Federal Election set for 21 May, many in the markets strongly think June will be the time for a rate rise. The big 4 major banks, with whom we are accredited, all tip the June RBA meeting – 7th, for the first increase in over 12 years.
A June increase could be only the first as the RBA could move multiple times. Some in the markets suggest 4-5 times over 6 months.
Effect on Caravan Finance
All this general interest rate talk is about the official cash rate which is determined by the RBA. But that is a base rate so to speak, from which the lending markets set their specific rates. So when the cash rate increases, our lenders in the caravan finance market will typically follow with increases in their caravan loan interest rate.
Individual banks and lenders decide their own rates and will decide how much of an increase or by how much to increase their specific lending rates. A rate rise may mean the end to record, historic low interest rates, but not the end to the cheaper rates we can secure on caravan finance.
To get a rough idea of what a small incrementally higher interest rate means for caravan loan repayments, head to our Compare Interest Rates Calculator. In this buying tool, we have listed a number of our banks and lenders in the RV finance market.
You’ll notice the different rates currently available. Input the amount you may want for a caravan loan and see the different loan repayment estimates displayed. It’s easy to see how a certain percentage difference in an interest rate calculates out to a higher repayment.
Exactly how the rates we can offer on caravan finance will change is yet to be known. But our message to caravan buyers remains consistent. If you are in a position to make your RV purchase before a highly likely June rate rise, then do so.
Securing caravan finance now while rates are at record lows could pay off in savings over the loan term compared with putting off the purchase until later in the year.
Contact Jade Caravan Finance on 1300 000 003 to handle your caravan finance requirements
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.
