Truck loan rates on new finance may increase following the Reserve Bank March cash rate rise with increases dependent on individual lenders. At the 17 March Monetary Policy Board meeting, the RBA made the decision to lift the cash rate by 0.25% to 4.1%. This follows the February rate rise in response to Australia’s spike in the inflation rate.
For operators planning to upgrade their vehicles, the issue will be finding the most competitive and affordable truck loan rates as the market rises. Lenders in the commercial lending sector set their own rates. While their funding costs may increase with a cash rate rise, individual lenders may choose to remain more competitive by minimising any increases to their rates. Having access to a large and specialised lender base through our broker service can assist in finding those best rates.
The next RBA rate decision is due on 5 May and there are many uncertainties, especially in regard to the conflict in the Middle East that may determine the May decision.
Understanding RBA Rate Hike
There was a lot to digest and take out of the RBA Board’s March meeting and decision. While Australians have seen petrol prices surge, due in principle to supply issues in the Middle East, this is not given as the reason for the rate hike.
RBA Governor, Michele Bullock, said that while high fuel prices would add to inflationary pressures, the rate of inflation was already too high. Ms Bullock explained that if the Board did not respond with a rate increase, price pressure would spread and make it much harder to adjust.
A significant factor in the decision being widely noted by commentators is the split in Board members voting for and against the rate rise. 5 were in favour and 4 were opposed, preferring a rate hold. This contrasts with the unanimous February.
Does this split provide any indication to the May decision? Governor Michele Bullock explained that the split was about the timing of a rate rise, not the direction. All members agreed that inflation was too high and rates needed to be increased. The reason that some members supporting holding rates was around the timing. They wanted to see where the economy would be in a few weeks and assess the implications of the timing of middle east conflict may have on the economy.
While domestic inflation is at the core of the rate hike, the uncertainties in the Middle East loom large. Ms Bullock said the conflict posed substantial risk in several directions. Noting that Australia hasn’t seen high inflation for a long time. Once it goes up, it is very hard to get down.
The next inflation data is due from the Australian Bureau of Statistics on 25 March and the next RBA rate decision on 5 May.
Changes to Truck Loan Rates
Existing fixed rate asset finance – Chattel Mortgage, Lease, CHP and Rent-to-Own, will not change as a result of the cash rate increase. These rates are fixed for the entire fixed repayment term. The rate and repayments will not change.
If you have other business loans, any change will depend on whether the loan has a variable or a fixed rate. Variable rates are subject to change and lenders typically increase these rates in response to an RBA rate hike. Credit facilities such as Business Overdrafts and some unsecured business loans can have a variable rate.
Most businesses do operate with a variable rate Overdraft. If the lender increases your rate, speak with us about the possibility of switching lenders to secure a better rate.
What’s ahead for Truck Loan Rates
For operators keen to upgrade vehicles and optimise deductions prior to the end of the tax year, these two recent interest rate increases may feel like they could not have come at a worse time. It is highly likely that we will see increases in the lending market. But there will still be variations across the market.
Our specialised heavy vehicle finance lenders remain highly competitive. Operators can take advantage of our vast lender base, especially our contacts in the non-bank sector, to secure their most affordable new vehicle financing. When rates are higher, our brokers can work to negotiate terms and balloons to lower monthly payments to ease cash flow pressures.
Looking further ahead… while the RBA does not give forecasts, predictions or front-run their future decisions, if inflation does respond to the RBA’s monetary policy and starts falling, the possibility of rate cuts down the line improves. ‘When’ that could happen remains the unknown. When it does occur, it may present the opportunity for operators to refinance truck finance mid-term to secure a lower rate for the final part of their repayment term.
For your best truck loan rates following the RBA rate hike, connect with Jade Truck Loans on 1300 000 003.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.
