It’s no secret that interest rates across many lending markets are currently in an upward cycle. Following the record low interest rates during the pandemic years, the RBA is currently addressing soaring inflation and record unemployment rates by increasing the cash rates. While the object is to curb spending and bring down prices, the effect is seeing increases to lending rates including for caravan loans.
With the cash rate hiked to 1.35% from that historic 0.1% in just a few months and further rises a definite in coming months, the focus for caravan buyers requiring finance is squarely on rates. Both for those that already have caravan finance and for those that are planning to apply to make that purchase.
While seeking the cheapest rate is a major focus, another key consideration is how to protect the loan from the impacts of future rates during the finance term. We look at ways that existing loan holders and intending applicants can consider to safeguard caravan loans from impending rate rises. These suggestions and strategies cover a number of possible scenarios including sourcing cheaper rates during a rate rise cycle, the effect on pre-approved caravan loans and any possible outcome for those with current loans.
Impending Rises for Interest Rates
With the RBA Board set to meet this week for their August decision on the cash rate, the data and forecasts all point to a significant hike. The ABS recently reported the June quarter economic data which sees inflation reaching a 20 year high of 6.1% and unemployment at a 40 year low. Both key data sets that the RBA Board considers in making its rate decisions.
As Governor Lowe highlighted in Board statements earlier in the year, increases in the cash rate and the flow on through the lending sector will take some time to record an effect on inflationary prices. While inflation rose less in the June than the March quarter, this is not seen as an indication that further rate rises are not required.
It is broadly expected that the August decision will be another 0.5% cash rate rise.
Current Caravan Holders should Secure Loans
Those with current caravan finance may be impacted by rate rises in the market. That will depend on whether the finance was arranged with a variable or a fixed interest rate. We arrange our Secured Caravan Finance with a fixed interest rate. This is an assurance for our customers that the rate achieved when the loan was organised, will remain current over the full term of the finance.
But that is not the situation with all lenders in the caravan finance market. Referring to our caravan loan interest rates table, it shows that some lenders offer a Variable Interest Rate Personal Loan to finance new caravans.
Variable rates in general terms are subject to change in line with changes to those specific loan rates by that lender. Lender change their rates according to their own guidelines and corporate policies. Those with this type of finance may be contacted by their lender and advised that their rate will be rising. This will result in higher repayments.
For those with variable rate loans, refinancing at a fixed interest rate through Jade Caravan Finance may be an option worth considering. Contact us for a no obligation discussion of the options available to suit your individual requirements.
Pre-approved Caravan Finance
Rushing to get a pre-approved caravan loan before a rate rise may appear a sensible way to go. But there are a few points to keep in mind. First, pre-approved caravan finance offers are only valid for a certain time period. If not acted on and proceeded with during that period, the offer expires. If re-requested after expiration, the loan offer would be priced based on the rates current at that new time.
Secondly, we are seeing examples of lender raising rates prior to RBA cash rate decisions. Banks and non-bank lenders have teams of economists forecasting the rate market and many are moving to raise rates in certain lending areas ahead of official rate rises. The timing of lender rate rises can also be determined by the markets – overseas or in Australia, where they source their funding.
So a pre-approved loan may be priced at a rate in line with that lender’s future expectations on the market.
Safeguarding New Caravan Loans
While current data indicate further rate rises are ahead, there are a few ways that those seeking new caravan loans and refinancing can safeguard their loan from changes. First and most importantly is to obtain the cheapest interest rate and a fixed interest rate.
As noted above, we arrange our most popular Secured Caravan Finance at a fixed rate. This rate remains the same, unaffected by future rate rises, through the entire term of the finance. Opting for a variable rate loan may mean the loan is susceptible to changes as rates rise.
Better, cheaper interest rates will always be our main focus. We have accreditations with many banks and non-bank lenders and the industry insight to know who is offering the best rates at any specific moment in time. So working through a broker-style lender such as ourselves, can result in a cheaper rate caravan loan being achieved.
New loan applicants should also be aware that lenders, including Jade, advertise their lowest rate which is based on finance for new caravans and for buyers with good credit ratings. Interest rates for finance second hand caravan on second-hand RVs and for applicants with a less than good credit profile may attract a higher rate. So keep that credit profile in good order to ensure the cheapest offer is made.
Contact Jade Caravan Finance on 1300 000 003 for a quote on fixed interest rate caravan finance or refinancing.
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.
