The Reserve Bank of Australia (RBA) raised the official cash rate at the May RBA Board meeting, ending months of assumptions and conjecture in the finance market. The decision by the RBA to lift the official cash rate to 0.35% from the historic low of 0.1% was expected but is still extremely significant. Following the RBA May rate rise, new motorbike buyers will no doubt be wanting to know what this means for motorcycle finance interest rates.
We address that question by highlighting key aspects of the RBA’s decision including the reasoning given for the decision at this time. An explainer which includes the prospects for lending rates in general terms moving forward.
As the RBA’s rate rise decision came just weeks out from the Federal election, it is important to note that the RBA does not make decisions based on government directions. The central bank is independent of government in that respect and makes decisions around monetary policy based on the economic conditions.
The May decision was also extremely significant as it represented the first time that the cash rate has been increased for 12 years. So for many, this will be a new experience to face interest rate increases rather than decreases.
The amount of the increase, 0.25%, was much higher many in the financial circles had anticipated. A 0.15% for the first rise was probably in the range of expectation. But the RBA has framed this increase as ‘normalising’ the cash rate after the rate was cut somewhat dramatically in 2020 as the Australian economy faced dire conditions as a result of the pandemic.
May RBA Board Statement: Main Points
The outcome of the RBA Board meetings is officially announced via a statement. This statement outlines the reasons behind the Board’s decision on interest rates and provides its forecasts and outlook for the coming period.
The main points in the May statement comprise:-
- Timing appropriate to commence withdrawal of some of the monetary support provided during the pandemic.
- Time to start normalising conditions in regard to monetary policy.
- Faster pick-up in inflation than expected due to faster economy bounce back.
- Unemployment in target region, currently 4% with expectations of further reduction to 3.5% by early 2023.
- Despite uncertainties from global events, positive outlook for economic growth.
- Global events and conditions causing uncertainty: Ukraine war; increase in COVID-19 situation in China; global inflation.
- Inflation rising in Australia economy caused in part by strong demand putting pressures on business’ supply capacity. Many businesses still having issues with staffing in order to operate to full capacity. Businesses passing on the cost rises they are facing to consumers which in part is impacting inflationary pressure.
- Additional rise in inflation is expected. This is expected to be followed by a decline as the supply issues are resolve.
- Forecasts in regard to inflation in the future are based on assumptions that additional interest rate increases will occur.
- Evidence of wage growth via wage increases in private sector.
The RBA has stated its commitment to continuing to do what is needed to see that inflation returns to its target levels. This, the Board states, means that more interest rate increases will be needed.
The RBA Board has its next meeting to make determinations on the cash rate in early June. By that time additional economic data will be released which may influence the decision making process.
Motorbike Finance Impacts
For those planning to buy a new motorbike with finance in the near future, the message to hear loud and clear is additional interest rate rises in the future. As has been eluded to by commentators and analysts, it is expected that the RBA will make a number of increases to the cash rate as it starts to normalise conditions and that means clawing back the pandemic rate cuts.
Changes in the cash rate flow into all lender markets. Individual lenders will decide how they will adjust the interest rates offered for each of their own loan products based on their own guidelines. Several major banks lifted their home lending rates within hours of the RBA decision and it is expected that we will see our lenders increase rates in markets such as motorbike loans.
As we have accreditation with many banks and non-bank lenders, we have the ability to source a vast section of the motorcycle loan market to secure the cheapest available rate loan for our customers.
As a handy guide to motorcycle interest rates, we have compiled a table which doubles as a loan calculator. Simply input the amount required for the bike loan and immediately displayed will be the estimated repayments on a loan from a range of lenders.
Key take-outs and reminders for buyers from the May RBA decisions are:-
- Proceed with loan applications for purchase as soon as possible to avoid further rate increases which may come as soon as June 2022.
- Keep credit rating in the good range to ensure the cheapest interest rate is offered. The lowest advertised interest rates are typically for good credit score applicants.
- Use Jade Bike Loans to source the motorcycle loan for quick, expert and comprehensive loan sourcing for the cheapest offer.
For cheap motorcycle finance contact Jade Bike Loans at 1300 000 003
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA ARE 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.
