While many boat-owners will be focussing on their summer boating plans at this time of year, those that are still to purchase their boat and arrange their boat loan, may still be keeping an eye on the interest rate scenario. For those wondering what may happen with boat loan interest rates, we advise that the RBA ends the year by holding the historic low cash rate and issued a statement on its outlook for the economy which underpinned the decision.
December is the last meeting of the RBA Board for 2021 and comes at a time of some uncertainty around how the new Omicron variant of the coronavirus may impact the Australian economy. As states have lifted most of their restrictions and Queensland has re-opened its borders, the COVID case numbers are on the rise in several states. Though state and territory Premiers are stressing that we should focus on hospitalisations, which are low, and not the total case numbers.
While the RBA did hold the official cash rate steady at its latest meeting, the uncertainty of what Omicron may hold was mentioned in the accompanying statement. We provide a report on the statement by the RBA Board as issued on 7 December and how their decision may have any effect on boat loan interest rates.
Reserve Bank of Australia: December Board Meeting Statement
Despite some level of expectation in the financial markets that the RBA would need to lift the official cash rate in response to inflationary pressure, the board held firm with its previously conveyed approach. The Board held the official cash rate at the historic level of 10 basis points or 0.1%.
On what it based this latest decision is outlined in the statement that the Board releases following each these regular meetings.
Here is an overview of the major points which were included in that statement which provide an insight into the Board’s reasoning and its outlook:-
- Following the setbacks caused by the widespread and severity of Delta, the economy is showing good signs of recovery.
- Consumption (spending) by households indicate a strong bounce back.
- There is an improved outlook in relation to business investment.
- Omicron has emerged with some uncertainty but is not expected to derail recovery.
- A return to pre-Delta economic pathway is expected in first-half 2022.
- High job ad levels and problems for business filling positions is indicative of a strong recovery in the labour market.
- Wages growth is still at a low rate but has posted some level of pick-up.
- With further tightening in employment the pick-up in growth of wages is expected but only gradual.
- The key indicator that the RBA has consistently flagged as one of its main focus points – underlying inflation, is at 2.1%. A level below its target of sustained 2-3%.
- Higher petrol prices have contributed to the CPI rate of inflation to reach 3%
- 5% inflation is expected in 2023
The hot housing market has been a major point of discussion in financial circles through 2021 and a reason that many analysts were pinging an expected rise in interest rates by the RBA earlier than the stated 2024. But the RBA noted that housing mortgage commitments had recently declined following the very high levels posted earlier in the year.
With the Board not scheduled to meet again until the first Tuesday in February, it could be expected that lending rates, especially on boat loans will remain as they are at low levels until at least that time and possibly to the 2024 timeframe the RBA has previously indicated for a rate rise. We explain if that is a realistic expectation and how those seeking marine finance can circumvent any impact of a rate rise on their loan.
Marine Finance Rates and Decisions by the RBA
The connection between the official cash rate as set by the RBA and the interest rates set by boat finance lenders should be understood to get a comprehensive grasp of marine finance. The official cash rate is not the rate that boat loan lenders or lenders in other sectors offer. It is the rate that banks are charged on the unsecured loans they exchange on an overnight basis.
It is seen as a foundation or starting point for banks and lenders to set their rates as it can be one of their basic costs of funding. On top of that they need to allow for their own operational costs and the level of risk or interest they individually attach to a lending area, such as marine finance.
Lenders that obtain their funds from other global sources may be paying higher or different rates of interest. It has been noted that some overseas markets are already lifting their rates. Lenders that specialise in boat loans will be tend to have greater interest in the sector and can offer more competitive rates.
All reasons as to why Jade Boat Loans is accredited with many banks and lenders. Rates on boat loans vary across those lenders that are active in the area and can vary at different times. By being accredited with so many, we can access the cheapest on offer at any one time.
The RBA has indicated 2024 as the possible timing for when they think economic conditions may be right to lift the official cash rate. But many experts think those conditions may arrive much earlier and/or conditions may trigger a rise.
Lenders may also independently increase their rates based on their own assessment of the market as some have already done with home loans.
Fixed Rates Provide Assurance
One proven way to protect a boat loan against any interest rate rises during the repayment years is to secure a fixed interest rate loan. Jade Boat Loans provides fixed interest rates on our Secured Boat Loan. So the cheap interest rate achieved at current low levels now, would be sustained and retained over the complete up to 7 years of the boat loan.
To ensure a loan at current low levels for the full boat loan term, it could be time to speak with us to secure your loan and move on your boat purchase.
For a boat loan at current cheap interest rates, contact Jade Boat Loans on 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 MIS-PRESENTED DATA AND DETAILS HEREIN.
