While runners were lining up to contest the Melbourne Cup and voters lining up to cast their ballot in the US Presidential Election, on Tuesday 3 November, the Board of the Reserve Bank of Australia was meeting to consider what further measures they could take to support economic recovery. Depending on your personal area of interest would have determined which event attracted more of your attention. As leaders in leisure lending, our team at Jade Caravan Finance was focused on the RBA meeting rather than the race meeting or the race to the White House and we were very pleased with ensuing announcement.
To catch you up, earlier in the year, the RBA announced a cut to the official interest rate, known as the cash rate, along with other measures to work with the Federal Government’s fiscal measures in addressing the economic impacts of COVID-19. At its November meeting, further measures were decided, the main one of interest to you and to us, was reducing the cash rate by 15 basis points from 0.25% to 0.1%. It also reduced the rate on overnight funds transfers/borrowings for banks which should further reduce the banks’ costs.
So what does all this mean to our existing caravan loan customers and those planning who are currently planning to apply for caravan finance? We put official rate cuts into perspective for you.
Rate Cuts in Perspective
The cash rate is not the rate that applies to consumer finance such as caravan loans. So no, we’re sorry, but 0.1% won’t be the interest rate on your caravan loan. The cash rate, also known as the official interest rate, is the rate associated with banks sourcing their funds and as such is the basis for each lender structuring their own lending rates.
Once the RBA acts in this way, it is then up to each lender to decide if they will pass on all, none or part of the percentage change via their own rates to their own customers. In the past, some lenders have failed to pass on the full rate cut. But the current pressure on the banking sector and the need to stimulate the economy has seen more banks pass on the full rate cuts. All major banks have agreed to pass on the November cut.
Pass on to who? Specifically, names were to some existing home mortgage holders and some existing business loans will benefit with a reduction in the interest rate to their existing loan. As you may be aware if you hold a home loan, they are structured differently from consumer loans such as Secured Caravan Loan. For existing caravan finance contracts which are at a fixed interest rate, no change is expected.
But be assured, Jade Caravan Finance always searches for the cheapest rate for all our customers and we arrange fixed interest rates to provide our customers for that cheap rate for their full loan term. That means assurance and certainty for you moving forward.
In regard to prospective new customers, Jade will be adjusting our advertised interest rate on caravan finance in line with the variations made by the many lenders we are accredited with. When you request a quote or submit a loan application, your Jade consultant will be sourcing you a loan offer at the cheapest interest rates on caravan finance achievable.
Caravan loans and the interest rates applied to the loan are assessed on an individual basis. The lender makes their own risk assessment of the applicant based on credit profile and the application details. Details of the caravan being purchased, if second hand, are taken into consideration.
Refinancing Option
The first thing many think of when they hear the words ‘interest rate cut is – refinance. Jade Caravan Finance provides refinancing services and can assist you with a quote. If your loan was arranged by someone other than Jade and at a higher rate than we can achieve for you, then refinancing may put you in a better position.
But a number of factors should be considered. Secured Caravan Finance contracts will usually include break fees. This is a fee charged by the lender when a loan is paid out before the loan term is due to conclude. By refinancing, you are paying out a loan early. A new loan is being established. So the costs of both establishing a new loan and paying out the old one need to be accounted for.
Another factor is the caravan itself. You may have purchased your van brand new and your existing loan will reflect that. But applying for refinancing means applying for a loan for a caravan which is now a number of years old. That would be considered a used caravan and may attract a different interest rate or loan conditions.
Where to From Here?
The November rate cuts look like leaving interest rates at even lower levels for some time. Dr Lowe, Governor of the RBA has been talking end of 2021 or 2022. So if you’re thinking of upgrading to a new caravan or purchasing your very first, it’s looking like this current timeframe is the best you’ll get in terms of loan conditions. No further cuts are envisaged.
To apply for a caravan loan, simply give us a call or complete our online application form. Or contact us for quick quote.
For loan quotes on the caravans, camper trailers, motorhomes and RVs, speak with a Jade Caravan Finance consultant 1300 000 003
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