Confusion for car buyers as interest rate forecasts fluctuate in Australia
Just a week after the Reserve Bank of Australia (RBA) kept interest rates on hold and forecast more rises may be required, there was talk of rates going down this year. The comments reported in a major masthead were made by the Chief Economist of the CommBank. Not surprisingly, the comments made headlines in a number of media outlets.
The reports may create confusion for buyers planning the timing of new purchases with car finance. Possibly wondering whether they should rethink those plans. Consider a variable interest rate rather than a fixed interest rate car loan or delay the purchase until interest rates come down.
In the same week, a new data set was released which led to more commentary around interest rates. The Australian Bureau of Statistics (ABS) released the March unemployment figures on 13 April. The employment data is a major consideration for the RBA when it comes to rate decisions. We provide a rundown of the latest commentary and the latest statistics to assist buyers better understand the rate situation in regard to car purchases with finance decisions.
Recent Comments re Interest Rates
Comments regarding forecasts and outlooks for interest rates emanating from a range of sources are extremely common and to be expected. The major banks all have their own teams of analysts and economists who study the economic data and trends and prepare forecasts and outlooks for the bank. Other companies and organisations also have economic experts that analyse the numbers and issue their forecasts. These are regularly reported in the media.
The recent comments around rates falling this year, as reported in the SMH, quoted CommBank’s Chief Economist as saying that the RBA may have to commence cutting interest rates by the end of this year. The reasoning or outlook supporting this viewpoint was that real incomes would be impacted by high rates of inflation and high interest rates and many Australians would not be in a position to cope with the situation. The resulting scenario being that the RBA would need to support households by cutting rates.
An expectation for interest rates was also reported recently from another of the Big 4 banks, the ANZ. That expectation is for rate rise at the RBA’s August meeting. In recent months there has been differing outlooks from the big banks in regard to interest rates decisions.
Those planning to take on motor vehicle finance to purchase new vehicles, should note that these are forecasts and outlooks not definite outcomes. As mentioned by the RBA Governor in delivering the April rate decision, the RBA Board considers all the available data when making its decisions. Key data includes the latest unemployment figures which were released on 13 April and the inflation figures which are due out on 26 April.
Impact of Latest Unemployment Figures
The latest unemployment figures released by the ABS on 13 April show unemployment remaining steady at 3.5%. This indicates the tightness persisting in the labour market and an outcome which some economists see as counter-indicative to interest rates being cut. Remarks have been reported that the outcome may place pressure on the Board of the RBA to announce another rate rise in May.
As reported by Ms Lauren Ford, the Head of Labour Statistics at the ABS, the unemployment rate of 3.5% is the lowest for nearly 50 years. The participation rate remained at 66.7%. Ms Ford said this reflects the tight market for labour and the reason why many employers continue to face difficulties in filling job vacancies.
There had been an expectation expressed by some analysts that unemployment would increase slightly. This continuation of the near-historic low is seen as a possible reason for the RBA to announce another rate increase.
Car Loan Interest Rates
So what does all this mean for car loan interest rates, especially for those considering a hire purchase car? Banks and lenders will set their rates in their different lending markets based on their own outlooks and the decisions from the RBA. Forecasts, outlooks, and commentary will always be made and reported. Whether an individual lender acts ahead of RBA decisions based on its own forecasts is at their discretion.
This variation in outlooks and forecasts may create even more variations in rates across certain lending markets. Making the process of finding the cheapest rate at a certain time, even more time-consuming and challenging for car buyers. It also further highlights the benefits of using a specialist broker to source motor vehicle finance.
Despite forecasts on interest rate cuts and rises from various sources, car buyers can continue to source cheaper rates on car loans from Jade Car Loans.
For those seeking further direction and indications, the minutes of the RBA Board’s April meeting will be released on 18 April. The Board’s next meeting to make a decision on interest rates is 2 May.
If you have more questions about car loan interest rates, check out the Business Car Loan Interest Rates and learn more about how to find the best car loan calculator for ABN car loans by visiting the Best Commercial Car Loan Calculator page. Additionally, you can explore No Doc Car Financing FAQs for more information on car loans for business vehicles.
Contact Jade Car Loans 1300 000 003 for cheaper interest rates on motor vehicle finance.
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.