The RBA Board meets to discuss interest rates on the first Tuesday of each month, except January and the outcomes of these meetings are always keenly watched. But the first week of August was more significant than many other months with several major economic statements and an estimated 16 million Australians under some form of COVID-19 lockdown restrictions. Jade Car Loans provides an overview of RBA's August Decision, quarterly statement and lending impact on motor vehicle finance.
The RBA Board made its monthly Monetary Policy Decision (interest rates), released its Quarterly Statement on Monetary Policy and Governor Philip Lowe appeared before the House of Representatives Standing Committee of Economics.
Businesses and individuals would be understandably nervous as to how the scenario would play out in economic terms.
RBA August Decision
The Board kept the official cash rate on hold at their August meeting and continued with their bond buying program as previously outlined. The impact of the COVID outbreaks was noted as interrupting the country’s strong recovery and a decline in GDP would be expected in the September quarter.
In the statement announcing the monthly decision, the Board notes that previous experience has shown that the economy can bounce back quickly after outbreaks but the economic outlook over coming months is uncertain and dependent on the health scenario and the measures of containment implemented.
While unemployment had continued to decline through June, it was expected that an increase would be reported due to the current lockdown. It was expected to reach 4.5% by the end of 2022 and around the 4% mark at the end of 2023. Despite a spike in the CPI (Consumer Price Index) inflation rate in the June quarter, inflation remains at 1.75%.
The RBA Board repeated its earlier commitment to not increasing the official cash rate from the current 0.1% until inflation is sustained around 2-3% which is not anticipated until 2024.
Quarterly Statement on Monetary Policy
In his opening statement to the Economics Committee, RBA Governor Philip Lowe highlighted the five themes contained in the Quarterly Statement, due to be released later that day. These are that the economy has bounced back strongly from the pandemic; that recovery has seen interruptions by lockdowns; once restrictions ease the economy is expected to bounce back; the upsides seen in output and jobs figures have not been experienced in prices and wages; and that the RBA monetary policy is providing significant support to the economy.
Of particular note for the lending sector was the elaboration regarding the official cash rate. Dr. Lowe said that the Board was looking for sustained inflation growth. Not just sneaking across the 2% target rate for one or two quarters but well into the target range of 2-3%. Labour costs and wage growth would be watched closely. This was not expected until 2024.
Lending Rates Outlook
The continuation of outbreaks of the Delta variant and resulting lockdowns is generally expected to have an impact on overall GDP and especially on unemployment. These figures are significant to any increases in the official cash rate and as such the RBA timeframe of 2024 for any increase is expected.
The official cash rate determines the basis for many of our banks and non-bank lenders to set their rates on motor vehicle finance. However, those lenders that acquire funding from overseas sources may incur higher funding costs. Individual lenders may increase their rates in different markets based on their appraisal of the market and their costs of borrowing.
Currently, the interest rates for business car loans are at historic lows across our loan portfolio. The rate does vary for different products with business finance rates lower than personal car loan rates, secured loan rates lower than unsecured rates and car loans for sole traders and car hire purchase being the cheapest of the business finance interest rates.
Aspects of individual loan applications will determine the interest rate and any specific conditions attached to individual motor vehicle finance contracts. Both individuals and businesses are reminded that despite challenges faced as a result of lockdowns, close attention should be paid to maintaining a good credit profile. A good credit profile is highly significant in achieving the best interest rate and loan.
We specifically mention that we negotiate all secured motor vehicle finance at a fixed interest rate. Some unsecured car loans may attract a variable interest rate. With fixed interest rate car loans, that rate remains the same for the entire loan period, which may be up to around 5-7 years. So by securing a loan at our current cheap rate, our customers will enjoy that lower, fixed repayment for the full finance term. A term well beyond the 2024 rate increase timeframe.
Current Motor Vehicle Finance Interest Rates
To review the current interest rates for business car loans, please refer to our Business Car Loan Calculator. This calculator has been developed to assist loan seekers in quickly estimating repayments on any vehicle they are considering before committing to a sale. The rates are generally applicable to the purchase of new vehicles in all categories.
The next meeting of the RBA Board regarding interest rates is scheduled for the first week in September and by then, the impacts of the current lockdowns should be reported in economic data.
Contact Jade Car Loans at 1300 000 003 for cheap interest rate car loan quote.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.