If you weren’t making your selection for the Melbourne Cup, around early afternoon on Tuesday 3 November, you may have been awaiting the RBA’s scheduled announcement around interest rates. The RBA Board met as usual on the first Tuesday of the month, and Dr Philip Lowe’s announcement didn’t disappoint with a 15 basis point cut to the official cash rate. A reduction from .25% to .1%.
Interest rate cut – that’s great news right? Well, yes but. That .1% is not the rate that consumers will be offered for loans on goods such as boats. At Jade Boat Loans will give you a quick explainer on what just happened, how it effects our current boat loan holders and how it may play out for new boat loan customers.
RBA Rate Reductions: Explained
The interest rate that the Reserve Bank of Australia sets is known as the official cash rate. It’s the interest rate that applies to banks sourcing their funds, borrowings from the RBA and from each other. While this is not the rate that applies to home loans, boat loans or any other form of business or personal finance, it does flow on into those areas. So keep paying attention!
The cash rate is the start of the interest rate story. It forms the basis on which the banks and lenders set the rate they offer for both lending and savings. It’s like a wholesale or producer price. They then need to build-in their costs and margins to establish their ‘selling price’.
The RBA reduced rates earlier in 2020 as part of monetary policy efforts to stimulate the economy in response to the economic impacts of COVID-19. The November cut was yet another measure to stimulate jobs creation and business activity.
Once the RBA makes these announcements, the pressure is on the lenders, especially the major banks, to ‘pass on the rate cuts’ to their customers either in part or in full. The major banks have signalled they would pass on the cut to selected customers. Specifically some home loan and business finance customers.
Home mortgages are usually the loan types that are most impacted immediately by changes in interest rates due to the structure of that type of loan. Consumer loans, including boat loans as arranged through Jade, are usually not impacted as they are at a fixed interest rate.
Rate Cut Impact on Boat Loans
The big question for both current boat loan holders and those considering a new boat loan, is how will the interest rate cut affect my loan? How much specifically our advertised interest rate on boat loans may change as a result of a 0.15% cut in the cash rate is far too speculative to estimate in general terms. We address every boat loan individually at all times and negotiate the cheapest boat loan interest rates for every finance across the board.
For current Jade Boat Loans customers on a fixed interest rate boat loan, there will be no change to your loan repayments or conditions. We arrange loans at a fixed rate to provide certainty over the loan term. While receiving a reduction now might appear great news, if you opt for a variable interest rate loan you have to be prepared for when the reverse happens. When rates go up.
For those ready to make a move and apply for a boat loan through Jade Boat Loans, we may be able to sweeten our deals even more as the rate reductions flow through to our area of the lending sector.
Refinancing Considerations
When interest rates change, there are usually calls from various commentators suggesting borrowers look for a better deal. That is primarily relevant to home mortgage holders with variable or part-variable interest rate loans.
For boat loan holders wondering if they can ‘get a better deal’ either due to this rate cut or due to that fact that they may have a long term loan on a much higher than current rate, there is the refinancing option.
Jade Boat Loans offers refinancing facilities and one of our consultants can source you a quote. The process involves securing a new boat loan which encompasses what is owing on your existing boat loan. Most Secured Boat Loans will include break fees. This is a charge by the lender for paying out or ending a boat loan before the agreed loan term.
When considering refinancing, the new loan offer will include these charges so the entire package can be compared with staying with your current loan. If you’d like a boat loan refinance quote, simply call and one of our consultants will source you a quote.
One aspect to especially keep in mind when refinancing is the age of the boat. You may have purchased the boat new but now, several years on, the refinancing lender may consider this a used boat and a different set of loan conditions may come into play.
Making the Most of Rate Cuts
This could be the catalyst for you to make that decision to upgrade your existing boat or get into boating for the first time. To answers some questions you may have around how much repayments may be contact us for a pre-arranged loan quote.
To discuss cheap interest rate boat loans, contact Jade Boat Loans 1300 000 003
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