The May RBA rate cut decision will not impact existing fixed rate motorbike loans, may affect those with variable rate loans, and should lower new loan rates. Improving the possibilities of riders considering a new machine with finance achieving a lower interest rate loan as lenders respond to the Board’s decision. This could be the opportunity many have been waiting for and at a great time with the possibility of value prices with the usual mid-year sales period.
But those new to taking on finance should appreciate that the cash rate as addressed by the RBA which now sits at 3.85% is not the interest rate offered by lenders on various types of loans. The cash rate as set by the RBA is an overnight borrowing rate for banks and lenders. Lenders use this rate as a basis to set their own rates, which then allow for their own borrowing costs, expenses and other factors. Rates offered to individuals also depend on the individual credentials of the borrower.
For those considering holding off on their purchase in anticipation of further cuts, reviewing what the Reserve Bank (RBA) Board said when announcing the decision could be useful intel. For riders with existing bike loans and those considering applying for new finance, we provide an explainer of what this latest RBA rate cut means for their loan.
Effect of RBA Rate Cut on Existing Loans
For riders with an existing loan which has a fixed interest rate, they will see no change to their loan rate or repayments as a result of the latest RBA decision. These types of loans will typically be Secured Motorbike Loans which are usually arranged with a fixed rate of interest. With a fixed rate loan, the interest rate and the repayments remain unchanged over the full finance term.
The same is not the case if a rider has a loan for a motorbike with a variable interest rate. Some lenders offer generic personal loans which can be used to finance many types of goods including motorbikes. These loans may be secured or unsecured. While Secured Loans usually have a fixed rate, an Unsecured Personal Loan may have a fixed or a variable rate, depending on the type of loan and the lender.
A variable interest rate is subject to change. These changes occur when the lender makes their decision to raise or lower their rate on that type of loan. Lenders typically make these decisions in response to cash rate decisions by the RBA. But the amount that an individual lender may cut their rates on the different loans in their portfolio may vary. While banks typically pass on a full rate cut to their home loan customers, the reduction on other variable rate loans may be different.
A cut in the interest rate flows through to a reduced monthly repayment figure. Riders with existing variable rate loans will be advised by their lender of their new rate and new repayment schedule.
Some borrowers that have taken on motorbike finance in recent times may have requested a variable rate loan with the forecasts for several rate cuts over their finance term. While this strategy may pay off with rate reductions and a lowering of repayments, variable rates are always higher than fixed rates. Before deciding on this strategy, buyers may use our Finance Calculator to compare total interest payable over the term of a loan with a fixed and with a variable rate.
Getting Lower Rates on New Motorbike Loans
The RBA rate cut as announced on 20 May applies to Australia’s cash rate. This is now down 0.25% to 3.85%. This is not the rate for consumer loans but the rate that banks and lenders pay for their borrowings. As a result of the decision, we will see many of our lenders reducing their rates on both secured and unsecured loans for motorcycles.
To get the lowest rate possible, buyers can use our expert brokers to do the hard work for them. The consumer credit market is extensive, and rates offered by individual lenders vary across the market. We have access to a large market and source the best rates for each customer.
Lenders will advertise their best rate for new goods, as opposed to second-hand, to borrowers with a good credit profile. Applicants with a less than good credit score may expect a higher rate than the best rate. Improving the personal balance sheet to improve the overall financial position may contribute to being offered a better rate. This may be achieved by reducing debt levels and paying off credit cards.
A better rate may also be achieved by making a large downpayment to require a lower loan. A better loan amount compared with the value of the machine, is seen by lenders as lower risk and may achieve a better rate.
Compare our current rates and request a quote based on your specific application details.
May RBA Rate Cut Details & Prospects
For those planning to apply for a motorbike loan a bit later in the year, whether or not further cuts may be on the horizon will be of interest. The RBA Board does not typically provide indications of their future decisions. The messaging is usually consistent in relying on the data at the time.
In the May Monetary Policy Statement, RBA Governor Michelle Bullock noted that the decision was very much in response to headline inflation falling into the RBA’s target 2-3% range. The first time this has occurred for over three years.
But Ms Bullock warned of the uncertainty as a result of the current global tariff situation as the Trump administration continues to apply tariffs globally. How other countries respond will be a key to economic growth, inflation and unemployment in Australia.
The RBA will next announce a rate decision on Tuesday 8 July.
To achieve competitive motorbike loan interest rates following the recent RBA rate cut, 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.
