Effect of Interest Rate Changes on Bike Loans

As 2022 got underway there was increasing speculation, well more like expectation, that the RBA (Reserve Bank of Australia) would lift the interest rate. Specifically the official cash rate. Australians have enjoyed the cheapest lending rates ever recorded, across most markets since at least November 2020 with no interest rate changes. This was when the RBA dropped the official cash rate to the historic 0.1%. They dropped it and they left it there, on hold, right through 2021.

But while Australians enjoyed the cheapest ever loans for a wide range of goods including motorbikes, the economic and other conditions and started to change. Changed to such an extent that from late in 2021 some financial analysts were already starting to call on the RBA to lift interest rates.

So what happens to consumer loans such as bike loans if the RBA lifts the official cash rate? We explain what is happening with the RBA and the cash rate and the effect of any interest rate changes on bike loans.

The Cash Rate and Your Rate

If you’re not across the finance markets exactly, we’ll start with a brief explainer of interest rates in general terms before moving into more specifics around how you can achieve a cheap interest rate motorbike loan.

You will read a lot in the media with general references to ‘interest rates’. What most finance writers and commentators are referring to is the overall general rates and on the cash rate. The official cash rate is set by the RBA and it is not the rate lenders are offered on loans.

The cash rate is a rate that banks can pay on overnight loans at an industry level. This rate is essentially a starting point from which banks and other lenders then build in their costs and other factors to arrive at the interest rate they are prepared to offer on the various loans.

Lending interest rates are different for different categories of consumer goods and business finance and will vary from lender to lender. Why? Because lenders may choose to be or not to be competitive in a certain sector, they may see some sectors as having a higher lending risk and other implications.

That’s why Jade Bike Loans is accredited with a large number of lenders. We ensure that we have the market covered so we can always get the cheapest interest rate currently available to suit individual customers.

Much of the conversation in the media about interest rates does relate primarily to the housing loan market as this is by far the largest single lending sector in Australia and receives the most attention. Home mortgage rates and motorbike loan rates are very different, so take care in drawing conclusions around bike loan rates when you hear something in general about interest rates.

Role of the RBA in Setting Interest Rates

The RBA Board meets on the first Tuesday of each month, excluding January, to decide if it will make any change to the cash rate. After holding the rate steady at the historic low for over 12 months and against rising inflation and falling unemployment figures, the February 2022 board meeting was very highly anticipated.

Calls were being made for the RBA to make a move on rates, though a rate rise in February was not realistically expected. The Board held the cash rate steady at the February meeting and reiterated its stance to be patient and wait for the conditions to be right for an increase.

The targets the bank is watching for is the inflation rate to be sustained in the 2-3% range and unemployment closer to full employment. Think sub 4%.

While the RBA steers clear of setting timeframes as in specific months when it could lift rates, it has shifted its forecasts from the previous indication of 2024 for a rate rise. It is looking more likely that we could see a rise in the cash rate as early as June 2022.

So when the cash rate is increased, banks and lenders then typically will increase their lending rates. By how much and on what loans will depend on the individual lender. Armed with this information, anyone considering purchasing a new motorbike in 2022 with finance can be smart to ensure that purchase is sooner rather than holding off.

Effects on Your Bike Loan Interest Rate

While the official cash rate is an indicator to how lenders set their rates, there are a raft of other personal factors which impact what an individual will be offered in an interest rate on a bike loan. Paying attention to what is involved can assist buyers achieve the cheapest rate possible.

These factors include:-

  • Ability to repay the loan as indicated by income compared with outgoings. Reducing debt such as credit card balances can improve a loan application.
  • Having a good credit profile is critical to achieving the cheapest rate. This is an indicator of risk when lenders assess applications.

Having the professional assistance of a Jade Bike Loans consultant to source and negotiate your bike loan can be a major advantage to achieving the cheapest rate compared with handling it all yourself.

Securing a fixed interest rate bike loan means your loan will not be impacted if the RBA or lenders increase interest rates over the term of your loan. Your repayments will remain the same regardless.

If considering a bike loan in 2022, it can be wise to act as quickly as possible to avoid the impacts of the expected rate rise this year.

To assistance in achieving a cheap interest rate bike loan, contact Jade Bike Loans on 1300 000 003

DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA IS PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INTENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.