The Reserve Bank has now lifted the cash rate three months in a row this year – May, June and July. The cash rate has increased from that November 2020 historic low of 0.1% to today’s rate of 1.35%. Quite a significant hike and going by what Governor Lowe said in the July statement, further rises will be in store, possibly as soon as August. The big issue for those planning to buy a new boat with finance and for those with existing marine finance is – what will happen to boat loan interest rates?
With the Sydney Boat Show happening later this month and several other major events to come, boat buyers will be out in force to secure the latest models in time for the start of the new boating season. Facing a higher interest rate and hence higher repayments may impact the boat selection, especially regarding price range.
We cover several issues to explain the outcomes for boat loans when the RBA lifts the cash rate.
Lender Reactions to RBA Rises
The cash rate is an overnight rate on bank and lender borrowings, it’s not a rate offered to customers. However, it forms a basis from which some lenders set their interest rates. The reaction from the major Australian banks has been to pass on the full amount of the rate rise to their customers. The media coverage tends to focus on the effect on home mortgage holders. But the effects will go through all lending markets.
To what extent a lender increases their interest rates in response to an RBA increase or decrease will depend on where that lender sources their funding. Some lenders will be sourcing funding from overseas financial markets and some locally. Globally, interest rates have been on the rise over recent months as the central banks of many countries raise rates to address surging inflation.
We are accredited with multiple lenders which enables us to source the lender that is best suited to our customer and is offering the cheapest interest rates on boat loans at the time of loan application.
Existing Boat Loans
The effect on existing boat loans of an RBA rate rise will depend on whether the loan was arranged with a fixed or a variable interest rate. If the loan was at a fixed rate for the full term then there should be no change to the rate or the boat loan repayments.
If the loan was arranged with a variable interest rate, then the rate and hence the repayments would be subject to variations in the market rate. The lender should advise these loan holders of any increases and the variation applied to the repayments.
Our Secured Boat Loan is the most suitable loan for most buyers of new boats and for many buyers of second-hand boats. We arrange these loans at a fixed interest rate so there will be no change over the loan term, regardless of RBA decisions.
Our Unsecured Boat Loan may have a fixed or a variable interest rate depending on aspects of the application and the boat being purchased.
Loan Applications in Progress
For those that awaiting a quote on a boat loan, that quote will be priced at the current interest rate. Some lenders lifted their rates in some markets before the RBA announcement. Your Jade Boat Loans consultant will be seeking the cheapest rate possible.
Where a loan offer has been made and has been accepted by the applicant at a certain interest rate, that offer should remain unchanged.
For those with pre-approved boat loans that are yet to be acted on, it is advisable to speak with your Jade consultant to ensure the offer is still current at the rate originally offered.
New Boat Loan Applications
New applications for boat finance will be priced at the boat finance interest rates that is current at the time the application is made and the quote requested. As mentioned above, we have access to a vast number of lenders to source the cheapest current interest rates and your consultant will be working hard to source you the cheapest boat loan quote.
To see how the current interest rates will equate to estimated repayments for the boat you are considering, use our Boat Loan Calculator.
Achieving the Cheapest Interest Rate, Lowest Loan
With the news of the latest rate rises, some buyers may be rethinking their boat purchase with finance. Rather than put off that dream purchase, buyers may consider several options to reduce the cost of their boat loan:-
- Select a lower-priced boat to reduce the total loan amount.
- Pay a deposit to the boat dealer to reduce the amount of the loan.
- Ensure a good credit rating to ensure eligibility for the cheapest interest rate.
- Use our broker-style services to secure the cheapest rate from across a large number of lenders, quickly and easily.
Boat loan interest rates will increase as the RBA acts by lifting the cash rate but cheaper rates can still be achieved through our lending services.
Contact Jade Boat Loans on 1300 000 003 for cheaper interest rate boat loans
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.