As we approach the end of the first quarter of the new financial year and anticipate the upcoming Christmas-New Year period, it's a prudent time to assess the current lending landscape and its effect on interest rates, particularly for those considering new truck purchases. In an environment where truck owners, drivers, and operators are continually grappling with challenges stemming from the ongoing coronavirus pandemic, any opportunity to enhance the bottom line or alleviate operational burdens is undoubtedly valuable. And if that opportunity involves securing a more affordable interest rate for a truck loan, it becomes an even more attractive proposition.
In this context, we delve into various factors that influence interest rates and the broader lending environment, aiming to provide valuable insights and guidance for individuals in the market for truck financing.
RBA Monetary Policy September Decision
The RBA Board’s monthly decisions on monetary policy and interest rates are key statements to watch. The decisions determine the official cash rate which ultimately flows through to the interest rates charged by banks and lenders across their portfolio. These decisions also provide insight into the central bank’s outlook for the economy in general which may provide guidance for business owners around investment decisions.
At its meeting on September 7, 2021, the Reserve Bank of Australia (RBA) Board made the decision to maintain the official cash rate at the current level of 0.1%, which has been in place since November 2020. Additionally, in terms of monetary policy, the Board chose to continue its government securities purchasing initiative at a rate of $4 billion per week, and this policy is set to remain in effect until at least mid-February 2022.
The bond purchasing program, also known as quantitative easing, is often described as a way of injecting money into the economy when traditional interest rate reduction measures have reached their limits. Notably, the RBA's policy adjustment pertains mainly to the timeline for implementing changes. Previously, the RBA had signaled a potential reduction in bond buying by mid-November, but this timeline has now been extended to mid-February 2022.
In its statement accompanying the decision, the RBA Board explained its rationale. The Board acknowledged the significant momentum the economy had gained prior to the recent outbreak of the Delta variant. However, the recovery has been disrupted due to the outbreak, leading to a projected decline in GDP during the September quarter and an anticipated increase in unemployment in the coming months. Despite this setback, the RBA believes it to be temporary and not derailing the overall recovery. The Board expects the economy to resume growth in the December quarter.
Dr. Philip Lowe, the Governor of the RBA, emphasized that the economic recovery will be supported by accommodative financial conditions, including historically low borrowing rates. He also commended the assistance provided by both state and federal governments, which has been beneficial for both businesses and households.
RBA Impact on Lending Rates
The Reserve Bank of Australia's (RBA) decisions regarding the official cash rate have a ripple effect on various aspects of the economy, including interest rates on loans such as truck loans. When the RBA keeps the cash rate at a historically low level, it generally indicates that interest rates for various types of loans, including truck loans, are likely to remain unchanged. However, it's important to note that the impact of RBA decisions on different types of loans can vary.
While the finance media may often discuss changes in home mortgage rates made by banks, the way lenders establish interest rates for home loans is different from how rates are set for truck loans and other forms of business finance.
The RBA's economic outlook statement and its quantitative easing (QE) policy can influence the lending environment and how some lenders approach loan applications. However, it's essential to understand that each loan application is evaluated on an individual basis. The strength of the application, the borrower's creditworthiness, the loan amount, and other factors will collectively determine the interest rate and any special conditions attached to the loan.
In summary, while the RBA's decisions play a role in shaping the overall interest rate environment, the specifics of how interest rates are set for truck loans and other business finance are influenced by multiple factors unique to each loan application.
No doubt the lending sector will be keeping a keen eye on the performance of the economy when assessing loans that is standard procedure. The prospects of a business over the term of a truck loan which can run to up to 7 years are clearly significant to the risk assessment of the application.
Current Truck Loan Rates
We continue to offer cheap interest rates across our truck loan portfolio – Chattel Mortgage for truck & trailer loan, truck leasing, Commercial Hire Purchase and Truck rental finance. These rates are based on new trucks and good credit rated applications and can be achieved by all types of businesses including low docs and no docs loan applicants.
To calculate estimates on repayments on trucks you are considering, refer to our truck loan repayment calculator. It provides users with a quick and easy way to compare both different trucks and different loan products.
Other Current Considerations
While the RBA Board monthly decisions are key to lending rates and their outlook may impact the approach of some lenders, there are a number of other issues to take into account at the present time.
- Will applying for government support due to a lockdown impact a current or future loan application? All loan applications are treated individually so this will very much depend how the business emerges post-lockdown and prospects for a speedy bounce back.
- Vaccination rates are being spiked as the key to escaping future lockdowns and the resulting damage to business and the economy. If the vaccination rates and outcomes exceed expectations, a better than predicted economic recovery may result. This could present improved business prospects for many operators.
- The shortage of workers in the agricultural sector continues to be a problem and an increase in produce prices is forecast as a result. For those operating in this sector, this factor may be significant to business.
- Supply shortages in the construction sector with timber, bricks and other materials may cause project delays which may impact work prospects for businesses.
Our team continues to stay across these and other issues which may affect lending and business and will post regular updates.
Contact Jade Truck Loans on 1300 000 003 to discuss cheap interest rate truck loans.
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.