There is always a lot of talk in the media about interest rates. Not just in the financial press but mainstream news is also awash with pieces about rates. Primarily this stems from Australia’s obsession with home ownership and the interest rate chat focuses on the home loan market. But interest rates are the major component of all types of loans and those considering taking on finance should consider what happens to motorbike loans when interest rates rise.
At Jade Bike Loans, we are obsessed with interest rates, specifically achieving cheaper interest rates for our customers. So we’re across the info that those considering a motorbike loan need to know about interest rates in general, specifics about interest rates on motorbike loans, how rate increases occur, what happens to loans when there is a rate rise and what loan applicants should be looking for to avoid paying more on their loan when rates do rise.
General Interest Rates Scenario
Since mid to late 2021 there have been calls from some economists and analysts for a rise in interest rates. The ‘rate rise’ being referred to is the official cash rate. This is set by the Reserve Bank of Australia (RBA) and while a rate for loans between banks, it does form a basis position from which lenders then set their rates.
The cash rate is used by the RBA as a monetary policy lever. When rates are low, individuals are incentivised to borrow to purchase goods and businesses motivated to invest in equipment. Both contribute to stimulating the economy.
Such was the case in 2020 when COVID-19 severely impacted the Australian economy. The RBA acted by cutting the official cash rate several times during that year to the historic low rate of 0.1%. But this caused the housing market to heat up especially in 2021 which started the calls for a rate rise to cool property rises.
As the economic recovery from COVID gained momentum, inflation started to spike which further increased calls for a rate rise. The RBA has targets for inflation and unemployment figures to be achieved before it intends to increase the cash rate.
Lenders use the cash rate as a foundation point and then add-in their own costs and risk assessments of various loan markets to set their own lending rates.
Interest rates on loans vary across different loan markets and across the lender market.
Interest Rates on Motorbike Loans
The interest charged on a loan is essentially the price charged by a lender for using their money to purchase your goods. Interest is charged on a per year (pa) basis. So the term of the loan, the number of years to repay the loan, and the interest rate together determine the monthly loan repayment.
The interest rate charged on motorbike loans will vary across the lender market. Loans for motorcycles are available through finance companies, banks, bike dealers through their individual brands and can be arranged through finance broker style lenders like Jade Bike Loans.
The more competitive a lender wants to be in say the motorcycle lending market, chances are the more competitive they will be setting lower interest rates than other lenders.
However, most banks and many large finance companies do have corporate guidelines that they need to adhere to. This typically means they will be far less flexible in negotiating on interest rates.
In sourcing a motorbike loan, many applicants will compare rates across the market. We’ve made that easy by providing an interest rate comparison table.
Impact of Rate Rises
When the RBA raises interest rates, most lenders will increase their own rates across their loan categories. To what extent or by how much the rate increases will depend on the individual lender. But as you can see by using our loan calculator, even a tiny rate increase can markedly increase the monthly repayments.
One aspect to watch for is fixed v variable interest rates. When a motorbike loan has a fixed interest rate, it means that the rate offered when the loan is offered remains in place for the entire loan term. If a loan has a variable interest rate, that is not the case. A variable rate can be increased or decreased by the lender, often in response to market rate changes.
Avoiding the Effect of Rate Rise
Through 2021 the RBA consistently stated that it did not expect conditions to be suited to a rate increase until around 2024. But it acknowledged that the rise in the inflation rate of late 2021-early 2022 they had not expected. The timing of 2024 is looking more like 2022.
Some economists are predicting the official cash rate to increase several times through 2022. The RBA meets monthly to make these decisions so any increases would occur on a monthly basis.
To avoid the impact of a general interest rate rise, those seeking motorbike loans should look for one with a fixed interest rate for starters.
Jade Bike Loans offers our Secured Bike Loan at a fixed interest rate and a fixed loan term so the monthly bike loan payments remain the same for the whole loan term. Thus the loan holder avoids any impacts from rate increases.
For a quote on a fixed interest rate motorbike 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 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.
