The RBA has raised the cash rate for the past three consecutive months and provided strong indications of further rises ahead in 2022. In the July statement, RBA Governor Lowe stated that the amount and the timing of future rises would be guided by upcoming data releases. Well, some of that data has now been released and the signs strongly indicate the August decision could be significant.
The data in particular is the Australian employment statistics for June as released recently the the ABS. The figures are good for the economy with a 50 year low unemployment rate. But for those seeking boat loans and other finance, the news is not so good. The significant drop in unemployment in the reporting period places more pressure on the RBA to make a larger increase in the cash rate.
As we’ve seen over the past few increases, the RBA decisions are felt through all areas of loans including marine finance. The past 3 rate rises have seen the cash rate rise from that historic low of 0.1% which was held for around 20 months, to the rate now of 1.35%. The rises have been 0.25% 0.5% and 0.5%.
What will happen at the RBA’s August meeting? What factors are driving rate rise decisions? How will RBA decisions affect boat loans?
We address these issues to provide a greater understanding of the current lending market for those planning a boat purchase with finance.
Latest Employment Data
The ABS announced a drop of 0.4% in the unemployment rate for June. This sees the rate drop from the 3.9% May rate to 3.5% for June. This is significant. We have seen unemployment fall steadily over the past 8 months which is in line with the country coming out of those lengthy 2021 lockdowns and rebounding. This is noted by the ABS.
But the monthly changes have been around 0.1% and for several months the rate was steady at 3.9%. The expectation by the business and economics sector was for another say 0.1% fall to around 3.8%. So a massive drop of 0.4% is significant. The 3.5% is the lowest unemployment rate in Australia since 2.7% was recorded back in 1974.
The impacts on the economy of falls in unemployment in the context of the current economic conditions further underscore the tightness that is being experienced in the labour market in Australia. Lower unemployment rates mean fewer people are looking for work. Fewer job seekers mean fewer workers to fill job vacancies.
Filling job vacancies has been a major issue for Australian businesses since the pandemic recovery began. It has been attributed to the border closures locking out overseas workers including students. With a less-than-optimal workforce, businesses are restricted in their operational capacity.
Reduced capacity has been mentioned by the RBA as contributing to supply issues. Constrained supply coming at a time of higher demand flows through to increased inflation. Rising inflation means higher prices and pressure on household and business budgets.
Rising inflation is the issue that the RBA is working to address through its rate rises.
Boat Loan Interest Rates Outlook
The latest employment data is of importance for those in regions like boat loans Sydney and those intending to apply for marine finance to purchase a new boat. Some financial commentators have already suggested that the next rate rise, due on the first Tuesday in August, will be much larger than the previous three. An increase in the range of 0.25-0.5% was highly anticipated. But based on these latest figures, a full 1% rise is not an improbable outcome.
A spokesperson from one of our leading lenders, the ANZ, recently forecast that the cash rate could increase by a further 2% overall in the coming months. The bank is forecasting 0.5% hikes in the coming months of August, September, October and November. If that occurs, it would see the cash rate at 3.35%.
Lenders will react to cash rate rises by raising their rates in their respective lending markets. For our marine finance lenders that means increases in boat loan interest rates across the board. How much will depend on the individual lender as rates vary for boat loans across the market?
This variation is likely a key reason why more and more buyers are turning to the services of finance broker lenders such as ourselves to source the cheapest interest rate loan. With our direct, industry-level access to many lenders, we can source the cheapest boat loan rates at that particular point in time.
For those planning a purchase, we urge you to get moving. Securing the purchase and the loan before the next or ensuing rate rises could mean a major difference in monthly boat loan repayments. Use our Boat Loan Calculator to see exactly what a rate rise could mean in repayments for the boat you are considering.
Another aspect to keep in mind is the type of rate that particular lenders offer on boat loans when deciding on your lender and your loan. Interest rates on consumer finance can be at a fixed or a variable interest rate. We arrange our Secured Boat Loan with a fixed interest rate. This is seen as preferable by many buyers as it ensures the rate and the repayment remain constant. With a variable interest rate loan, the rate and the repayments are subject to increases as rates rise.
Further data regarding consumer spending is due for release before the RBA’s August meeting. This data will also guide the Board in its next decision.
To secure cheaper, fixed interest rate boat loans contact Jade Boat Loans by calling 1300 000 003
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 MISPRESENTED DATA AND DETAILS HEREIN.