It was forecast and broadcast by the central bank itself and now it is a reality – interest rates have once again been hiked by the RBA. But the surprise element of the June decision was in the amount of the rate hike – a rather large 0.5%. This is considered large as this level of increase has only occurred five times in the past 30 years or so.
The economic and financial sector –economists, analysts and banks especially, had expected the RBA to act on rates in June, but to the tune of 0.25% or possibly 0.4%. So the 0.5% hike which puts the official cash rate at 0.85% was not widely expected. A key reason for the large increase is seen by some as a response to inflation increasing much higher than the RBA had predicted at its meeting the month prior. So effectively conceding its expectation was not spot on.
Inflation at 5.1% for the year to the end of March is beyond the RBA’s forecasts. The rate hike is clearly in response to this surge and the cost of living price pressures facing households. The RBA has noted that further rate rises will be ahead.
With interest rates on the rise, the focus for many boat buyers planning to purchase with a boat loan will be firmly on how the situation plays out in the marine finance market.
We cover off on the key aspects of the RBA Board’s reasoning around its June 2022 rate hike, its outlook and how the rate rise affects existing boat loans and new marine finance applications. Any rise in the cash rate does flow through to rises in lending interest rates and that includes marine finance. But we stress upfront that Jade Boat Loans is well-placed to continue to source better interest rate marine finance due to our vast lending panel and resources.
June 2022 RBA Rate Statement
The decision by the RBA Board each month is communicated via a statement that outlines the Board’s reasoning and typically provides an indication of the Board’s outlook for the economy.
The June statement included the following major points:-
- The rate of inflation, while above the expectations earlier held by the RBA, is below that of many advanced world economies.
- The inflation rise is very much attributed to global issues including supply delays which have been caused by the pandemic in overseas manufacturing sectors and the war in Ukraine.
- Prices in Australia are being impacted by several issues in the domestic economy including labour shortages and the results coming from the floods in the agricultural sectors.
- The recent increases in petrol prices and the situation regarding power prices indicate inflation in the upcoming period looks likely to be higher than the Board previously expected in May.
- Expectations now are for further rises in the rate of inflation before a decline next year to targets of 2-3%
- The RBA said rate rises will contribute to the return of inflation over time to these targets.
- As the global supply chain issues resolve, expectations are for inflation to moderate.
- Economic growth is at 3.3% for the year and the March quarter at 0.8%, indicating Australia’s resilience.
- The unemployment rate of 3.9% indicates a strong labour market. Lowest rate in around 50 years.
- The tight labour market causing businesses to compete to fill positions is expected to improve growth in wages.
- Uncertainties regarding the outlook for the economy exist with how consumer spending reacts to the increasing prices as a result of inflation.
In closing comments in the statement, the RBA Board said that it will be carefully watching household spending, the pandemic related global matters, prices of energy and commodities and analysing data in making further decisions and actions regarding monetary policy.
The June increase in the cash rate is seen as a further stage in withdrawing the support that was provided to the economy through monetary policy as a result of the pandemic. More steps would be expected in future months to continue to normalise the monetary situation.
In plain-speak that can be taken as additional interest rate rises to be expected in the months ahead. The next time the Board meets to determine interest rates is July 5th.
Marine Finance Outcomes
As we have covered in numerous articles, the official cash rate is a lending rate for banks and other lenders. It forms essentially the base from which lenders will set their lending rates. This applies to all sectors including boat loans. Rates differ across different lending sectors and the range of lenders offering marine finance.
With the rate rise adding to the pain of rising costs being faced by households, many will be awaiting the response from the new Federal Government for relief measures.
For boat owners with existing marine finance which was arranged with a fixed interest rate, the loan would remain unchanged. Jade Boat Loans arranges our Secured Boat Loan with a fixed rate to provide this level of certainty to our customers.
Unsecured Personal Loans which are available for boat purchases that are not accepted as security by our lenders, may be at a fixed or a variable rate. Variable rate loans can have the rate increased when the cash rate increases.
For boat buyers seeking new loans, on a relative basis, Jade Boat Loans will be sourcing the cheapest yacht financing rate available to meet the individual loan application requirements. Interest rates advertised by lenders do refer to loans for applicants with good credit ratings and new boats. Applicants can improve their prospects by retaining a good credit rating.
If the interest rate increase appears to have dashed your boat ownership dreams, speak with one of our consultants about how we may be able to a) source a cheap interest rate loan and b) structure the loan to achieve the repayment target preferred.
Contact Jade Boat Loans on 1300 000 003 for better interest rates on marine finance
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.
