For now the fourth month in a row, the RBA has increased interest rates. For August it was yet another 0.5% hike which will flow through to increase in lending rates in many sectors including marine finance and boat loans. The rate rises coincide with one of the peak times for boat buying – in the lead-up to the start of the new boating season.
For buyers that are still to make that boat purchase, understanding the implications of recent rate rises may clarify how to source the cheapest boat loans. The cash rate was on hold for quite some time at the 0.1% record low. It now sits at 1.85% and is set to go higher before the end of the year. Another rise could be announced as early as the first Tuesday in September.
These rate hikes are efforts to curb soaring inflation which the ABS recently announced had reached 6.1%. The combination of rising inflation and interest rates is placing pressure on many budgets and even further highlights the importance of sourcing the cheapest boat loan.
The RBA has cited a number of global and domestic issues as contributing to rising inflation which in turn is leading to the rate rises. These include the Ukraine war, global inflation, central banks tightening monetary policy through rate rises, China’s recent policy position in addressing a new COVID outbreak and other issues. Flood events from earlier in the year continue to impact prices domestically. The combination of strong demand post-lockdown and constraints to supply with businesses having issues filling jobs and facing other COVID-related issues, is also driving prices.
It’s complicated in many aspects but the simple outcome is – the current economic scenario has implications for boat loans. We explain.
Boats Loan Interest Rates: Overview
Marine finance is offered by a range of lenders either specifically or with more general personal secured loans. Providers of boat loans include banks, boat manufacturers and their marine dealers, finance companies and of course broker-style lenders such as Jade Boat Loans.
The rates offered on boat loans vary across the marine lending sector. Some banks for example won’t advertise a specific boat loan but will cover this sector within their more general personal secured loan category. On the other hand, specialist marine lenders such as ourselves and some of our non-bank lenders do offer specific Secured Boat Loans.
These differences in specificity and interest in the sector can be a key point of difference which is reflected in the interest rates. As you can see, these do vary across the lender market.
When the RBA acts to raise the cash rate, the lender response varies. The decisions as to how much and when to raise boat loan rates will be dependent on individual lender policies and guidelines. Some may go early and raise their rate prior to RBA decisions. Some may pause and wait and be more competitive by not passing on the entire hike.
Whatever the individual decisions and policies, one factor is quite uniform across the lending sector – the rate that lenders will promote as their lowest will be the rate that applies to boat loan applicants with a good credit profile and where new boats are being purchased. The exceptions of course being loans specifically for used boats.
So those requiring finance to purchase a boat can be presented with quite the task of sorting through the range of loans and lenders to source the loan that is right for them and at the cheapest interest rate.
Rate Increase Impacts
Prior to May 2022 the RBA had not increased the cash rate for more than 10 years. So this current scenario of multiple consecutive increases does present quite a new situation for many borrowers. Something they may not have confronted in their ‘borrowing’ lifetime.
When it comes to the actual selection of boat loan types, they remain unchanged with variations in interest rates. The specifications, features and conditions of say our Secured Boat Loan and the Personal Secured Loans for boats offered by other lenders are not in structure, impacted by rate rises.
But the interest rate on those loans will typically increase in line with RBA increases. Some lenders may pass on only the amount of the RBA rise, while others may impose a higher increase.
These rate rises will not have an impact on boat owners that have an existing loan which was secured at a fixed interest rate. But if the loan was arranged with a variable interest rate, there is a strong possibility that the loan will incur an increase in rate. This will flow through to a rise in the repayment amount.
For Secured Boat Loans we feature a fixed interest rate which is fixed over the full boat loan term. This safeguards our customers against rate rises.
Pre-approved boat loans also need to be addressed. A pre-approved boat loan is arranged and an offer made prior to purchase of the boat. These loans have a loan offer based on a certain interest rate which is valid for a set amount of time. It may be a month or a few weeks.
If the loan applicant purchases their boat and proceeds within the set time, the interest rate offered would be applicable. However, if the purchase is not completed in the time and the pre-approved loan lapses, it would need to be re-quoted if required at a later date.
A re-quoted pre-approved loan would be priced at the interest rate which is applicable to the loan and the applicant’s credit profile at that time. If that happens to be after a rate rise, then there would be as strong possibility it would be a higher interest rate.
As we are accredited with many lenders, we are always in a preferred position to quickly source better interest rates boat loans for our customers. Rate rises are inevitable but achieving the best rates available can still be achievable through Jade Boat Loans.
Contact Jade Boat Loans on 1300 000 003 for a quick boat loan quote
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.