‘The longer you wait, the higher the rate’ could be the slogan for the current situation in loans and finance. Not because of the loan application but in regard to rate rises including motor vehicle finance interest rates. On June 7 the Reserve Bank of Australia announced a significant rise in the cash rate and indicated more increases were on the cards. When and by how much are the unknowns.
For those who could be thinking, no it’s OK, I’ll wait, it may not happen – be alert, the message couldn’t be clearer – secure motor vehicle finance and proceed with that purchase as soon as possible.
A number of sets of economic data, announcements and decisions have been made in the past week or so on both a domestic and an international front which are seen as putting pressure on the RBA to act again on rates. Another rise could be highly possible as soon as the RBA’s July meeting in a few weeks.
Realising the impact of economic conditions on interest rates including motor vehicle finance interest rates may help buyers cost-effectively time car purchases to avoid higher rates and higher repayments. Staying across how the economy is travelling in the key areas addressed by the RBA in regard to rate hikes can be used as guide by car buyers as to when to source finance and purchase and not pay more than they should on the loan.
While the economy is recovering well from the pandemic issues, surging inflation both here and overseas is of great certain. The NSW Treasurer Matt Kean is reported as describing the situation as economic uncertainty. Some commentators are talking about the risk of stagflation.
For those considering a car purchase with finance at some time in the short to medium term that may translate to the longer the wait, the higher the rate. We update on the latest economic figures and events and strongly encourage buyers considering purchasing new vehicles with finance to act as quickly as possible.
Unemployment Figures
Unemployment is a key economic indicator for the RBA in regard to changing the cash rate. For May, the unemployment figures released by the ABS see the rate remaining steady at 3.9%. This is the lowest rate in around 40 years and the 7th month of a drop in the unemployment rate since the lifting of lockdowns and pandemic restrictions.
Some analysts and economists see this as further pressure on the RBA to move on rates in July.
Inflation Update
In the statement announcing the June RBA Board decision, Governor Lowe indicated that inflation could climb to around 6%. But in an interview a few weeks after that statement, Mr Lowe said that inflation could get close to 7% by the end of 2022.
Mr Lowe did not predict how fast the RBA would act. He reiterated earlier comments that each monthly decision would be based on the data as available.
Minimum Wage Decision
In another major move which could impact inflation and interest rates was the recent decision by the Fair Work Commission to increase the minimum wage by 5.2%. Great news for workers in that salary range but possibly not great for inflation and interest rates.
Some analysts put forward the scenario that increased wages will be passed onto consumers by businesses, thus further raising costs and fuelling inflation. But the general feeling is that these workers greatly deserve the pay rise.
So more data for the RBA to consider.
International Rate Hikes
The stock market has been reeling in response to what is happening in the US in regard to inflation and interest rates. As a global economy, events and conditions internationally have a flow-through effect in Australia. We’re seeing that with the war in Ukraine, the shutdowns in key markets such as China and also surging inflation in the US.
In this past week, the US Federal Reserve, the equivalent of our RBA, increased rates by the largest amount since the 1990s – 0.75%. The increase in an effort to rein in inflation in the US which is around 8.6%
In the UK, their central bank, the Bank of England has also increased the cash rate four times in recent months. Global decisions which have the potential to impact conditions in Australia.
Impact on Motor Vehicle Finance
The RBA has been proceeding with a process of normalising the cash rate after the pandemic support period of extraordinary low interest rates. The cash rate forms a basis for banks and lenders to establish the interest rates they will offer across their lending sectors. That includes motor vehicle finance rates.
As the RBA increases the cash rate, the lending markets respond with increasing rates. While Jade Car Loans focuses on achieving better and cheaper interest rates, the rates achieved for our customers are dependent on the market. Our accreditation with a vast number of lenders does provide us and our customer with greater choice and prospects of achieving the best rate on offer.
Car loan interest Rates for businesses vary across the range of motor vehicle finance products and those variations remain.
Some economists are tipping a 0.75% increase in the cash rate at the 5 July RBA meeting. To see what an increase of that size might mean to car loan repayments, simply use our calculators. Keep the loan amount and term constant while varying the rate to see the change in the repayment amount. Enough to get you moving?
Securing Finance Quickly
The signs are all there for further and possibly significant rate rises very soon. So moving on that car purchase should be a matter of urgency so the current lower rates can be achieved. We realise that supply is a major issue in the motor vehicle sector at the moment and many buyers are on wait lists.
For those that can source their vehicle, our consultants can move quickly to secure car loan quotes and fast loan approvals to ensure the cheapest rates are acquired.
The countdown to the next RBA meeting is on, so time to get moving and beat the next rate rise.
Contact Jade Car Loans on 1300 000 003 for a quick quote on motor vehicle finance at cost-effective interest rates
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.
