The RBA has lifted rates over the past few months after holding the cash rate steady for around 20 months at record lows. This changed situation has interest rates very much in the news at the moment and no doubt top of mind for anyone considering taking on finance and for many with existing loans. For those considering an RV purchase the priority may be on whether it is better to obtain fixed interest rate caravan finance or a variable rate loan.
The doubt around the fixed or variable decision may be based on the unknowns in regard to what will happen with interest rates moving forward. Much of the discussion when rate rises or cuts are announced centres on the home mortgage market. This is the largest lending sector and there are numerous options for mortgage holders in regard to rates.
But the caravan finance sector differs markedly from the home mortgage market in regard to interest rates and loans. Home loans extend over a longer period and as such, fixed rates are usually only available for a few years not the entire loan term. Mortgages often combine fixed and variable rates.
Caravan loans have much shorter loan terms and depending on the lender, can be obtained at a fixed or a variable rate. To assist buyers make decisions around their caravan finance, we provide this explainer on the current interest rate situation, caravan loan options and most importantly why a fixed interest rate could be preferable at this time.
Comparing Fixed Rate with Variable Rate Finance
With a caravan loan with a fixed interest rate, the caravan loan interest rate is fixed for the full term of the finance. It will remain unchanged regardless of RBA rises and changes to rates by the lender. With a fixed rate and fixed loan term, the monthly loan repayments are also fixed. So the entire loan remains the same until the payments are finalised.
With a variable rate loan, the interest rate is subject to changes by the lender. This means when the RBA raises the cash rate and lenders respond with changes to their rates, the rate on the loan can be increased. An increase in the rate would then result in an increase in the monthly repayments.
When rates are in a downward cycle, a variable rate loan may be an attractive option as there is potential for the rate to be reduced. But when rates are in an upward cycle the opposite occurs.
As interest rates are rising, securing fixed interest rate caravan finance can provide confidence for buyers that their repayments will remain unchanged. We arrange our Secured Caravan Loan at a fixed rate with fixed term to provide our customers with the peace of mind that their loan won’t change with general rate changes.
Caravan Loan Types and Rates
Differences in the type of interest rate, fixed or variable, can apply to different types of loans and loans from different lenders. The types of loans available for caravan purchases will vary across banks and finance companies. Some will offer a more general personal loan for this type of purchase, while others might provide the best caravan loan rates. We offer a specific Secured Caravan Loan.
With these loan type variations there are also rate type variations. Some fixed and some variable. Refer to our Compare Finance Rates to see what loan and rate types are available from a range of lenders.
We offer a Secured Caravan Loan and an Unsecured Personal Loan. Our secured loans feature a fixed interest rate while unsecured loans may have a fixed or a variable rate.
Which of these loan types – secured or unsecured, is best suited to individual purposes can be a personal decision or it may be based on the vehicle being purchased. Primarily that revolves around new versus used.
With a secured loan, the caravan is used as the security against the loan. The lender needs to accept the vehicle as suitable security. With new caravans that is usually the case. However, with used caravans, the age and condition will be assessed by the lender when deciding on accepting the vehicle as security or not. If not accepted, the Unsecured Personal Loan can be considered.
Regardless of the loan and the rate type, the actual interest rate offered by a lender will be based very much on the credit profile of the applicant and their creditworthiness. This includes an assessment of financial status and other inclusions in the application.
The rates advertised by lenders, unless otherwise noted, will be for applicants with a good credit score.
Current Interest Rate Scenario
By securing a fixed interest rate caravan loan, buyers are essentially protected against rate rises over the loan term. So what looks like happening with interest rates in general? They are on the rise.
The RBA has lifted the cash rate at its past three board meetings and it is fairly definite that another rise will be made in August. The RBA’s actions are to curb surging inflation and the Board’s decisions take into account the data around inflation and unemployment.
The latest employment figures for the June period were released recently by the ABS and the significant 0.4% to 3.5% is seen as adding pressure on the RBA for a larger rate hike in August. Additional rises may also be announced in the following months. The ANZ has forecast up to 2% in rate hikes before the end of this year.
So taking all that in, it can be logically concluded that securing fixed interest rate caravan finance at this time and before any more rate rises would be preferable.
Contact Jade Caravan Finance on 1300 000 003 for a quote on fixed interest rate 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.