If you have any type of loan – home mortgage, personal loan, business overdraft, etc, then you are probably highly aware of the situation around a potential rise in interest rates. If considering purchasing a new boat with finance, understanding the connection between interest rates and boat loans may assist with timing that purchase and achieving the cheapest interest rate boat loan.
Talk about a ‘rate rise’ has ramped up this week due to a number of significant data and events. The Federal Reserve, which is the US equivalent of our RBA, has lifted the interest rate in that country in the face of a massive surge in inflation. During the economic crisis stage of the pandemic the ‘Fed’ cut the key interest rate in the US to zero. The increase announced on 17 March Australian time is the first rate rise since.
Leading economists have been quoted as saying it is highly likely that the RBA will follow the US though the inflation and employment figures in Australia are dwarfed by the levels in the US.
The unemployment rate in Australia has fallen to 4% in figures released this past week. The 4% rate is significant as one of the targets set by the RBA as a reason to increase the official cash rate. In discussing the release of the latest unemployment figures, Minister for Employment, Stuart Robert said the flood situation on the east coast will likely negatively affect employment levels and this would be reflected in the next month’s data.
Cost of living pressures dominate the news and are being felt across the economy. Fuel prices have been on the rise due to global issues which puts pressure on inflation. The floods are also set to put pressure on prices of some foods.
Recent events in China could also impact the Australian economy. A flare-up of the COVID-19 virus has caused more shutdowns in that country which have the potential to further complicate supply chain issues for Australia. The war in Ukraine is having an impact globally in many areas including supply and pricing.
All these issues are pointing to the RBA acting sooner than expected in regard to a rise in the official cash rate. Since dropping the rate to the current historic low of 0.1% in November 2020, the RBA has consistently stated it did not expect conditions to be appropriate for a rise until possibly 2024. Those conditions appear to be occurring sooner and that rate rise is looking very much like happening in 2022 not 2024.
Boat Loan Interest Rates
If you’re planning to buy a new tinnie or fishing boat to enjoy time with friends and family on your local waterways, economic data and global events may seem literally a world away. But the interest rates in Australia are impacted by global events.
The interest rates set by banks and lenders are determined by a number of factors. The starting point is the official cash rate which is set by the RBA. This is a bank to bank lending rate. Lenders must allow for their costs. Lenders that acquire their funds from overseas will be impacted by rate rises in the source countries.
An assessment of individual loan markets also influence the interest rates that lenders attach to their different loan types. Those that are keener to do business in a certain market, such as boat loans, tend to be sharper with the pencil when it comes to offering competitive interest rates.
This can also be reflected in the type of loans offered by some lenders for goods such as boats. If you’re browsing say a bank or general finance company website for a specific boat loan, you may not always find one. With these lenders, boats may come under a more generic Personal Secured Loan.
The marine finance market is serviced by both the banking sector and the non-bank sector including finance companies and specialist marine finance lenders. Broker-style lenders such as Jade Boat Loans work across the lending market with access to a vast number and range of lenders. This provides us with the capability to access the most competitively-priced boat loans especially from our specialist marine lenders.
Impact of a Rate Rise
When the RBA does eventually announce a rate rise, this will trigger rises in interest rates across many lending markets. The extent to which individual lenders will increase their rates on any or all of their loans will be an individual decision.
But in principle, when that rate rise comes, it’s highly likely that interest rates on boat loans in general will go up. By how much can’t be anticipated at this stage. There is a possibility that the RBA may raise rates a number of times even in 2022.
The RBA Board meets monthly to make its decision on the cash rate with the next meeting scheduled for the first Tuesday in April.
The impact of a rate rise on boat loans essentially would mean a higher interest rate and therefore higher repayments. To see exactly how much even a slightly higher interest rate means in terms of monthly repayments, use our Compare Interest Rates calculator.
This chart shows the current rates offered by a number of banks and lenders. Enter a loan amount, possibly the price of the boat you’re considering, and see the difference in monthly repayments. That gives you a pretty good idea of roughly how much more you could be paying each month with a higher interest rate loan.
If an existing boat loan has a variable interest rate then there is the potential for the rate to be increased by the lender and hence the repayments increased during the loan term. For existing boat loans with a fixed interest rate, the repayments and rate would not change. Jade offers Secured Boat Loans at a fixed rate.
Establishing a Buffer against a Rate Rise
So the message is loud and clear – get in with that boat purchase and secure your fixed interest rate boat loan before the RBA moves on rates.
- Securing a fixed interest rate boat loan at our cheap interest rates establishes a buffer for our customers against general interest rate rises over their loan term.
- Keep your credit rating in good order to ensure you get offered the best rate available when the time comes to apply for a loan. Lenders will assess the individual credit rating when making loan offers.
- Engage Jade Boat Loans to source and negotiate the cheapest boat loan for you.
Contact Jade Boat Loans on 1300 000 003 for a boat loan quote before the expected rate rise
DISCLAIMER: THE INFORMATION AND SPECIFIC DETAILS CONTAINED IN THE CONTENT OF THIS ARTICLE HAVE BEEN PREPARED AND ARE PRESENTED PURELY AS GENERAL INFORMATION AND NOT INTENDED AS THE ONLY SOURCE OF FINANCIAL ADVICE FOR BOAT BUYERS AND LOAN BORROWERS. FOR THOSE THAT CONSIDER THEY REQUIRE SPECIFIC ADVICE, THEY SHOULD CONSULT WITH A FINANCIAL ADVISOR. LIABILITY IS NOT ACCEPTED IN REGARD TO ERRORS AND MIS-PRESENTED DATA AND DETAILS HEREIN.
