The RBA February interest rate cut should flow through lending markets including motorbike finance lenders, with any cuts subject to individual lender decisions. The Reserve Bank of Australia (RBA) sets and changes the cash rate with Monetary Policy decisions. This is not the rate that borrowers are charged by lenders. It is an overnight borrowing rate between lenders. Individual lenders – banks, finance companies, and other non-bank lenders, set their own rates based on their own guidelines.
While most banks and lenders have been reported as passing on the full 0.25% rate cut to the mortgage holder customers, the scenario in the consumer lending market, specifically with motorcycle finance, may be different. We explain how this latest RBA decision may affect motorbike finance, both for existing and new borrowers.
RBA Interest Rate Cut Decision
At its February meeting the RBA Board lowered the cash rate by 0.25%. While the decision was widely expected by the markets, it was not a definite by the RBA. In announcing the decision, Governor Michele Bullock noted that inflation was moving closer to the Bank’s target range of 2-3%.
Ms Bullock also noted that the labour market is unexpectedly strong, and the Board remained cautious in regard to any further easing of Monetary Policy, that is, rate cuts. The Board sees the outlook as uncertain on both the domestic and global level. Domestically in regard to activity in the economy and inflation.
The priority for the RBA remains as returning the rate of inflation to target. Based on recent forecasts, Ms Bullock said that they suggest that disinflation could be stalled if monetary policy is eased too early, by too much. But the progress made was acknowledged.
Lender Responses to Rate Cuts
For those with consumer loans or planning to apply for a loan, their priority will be what does the rate cut mean for them? As mentioned above, the RBA decisions affect the cash rate. Lenders use this cash rate as a foundation for setting their own rates. They then need to allow for their own borrowing and operational costs and other factors, using the economic forecasts and projections of their own analysts.
Guidelines vary across lending markets as is clear in the rate variations with different lenders and with different loan products. While cuts and increases are traditionally quickly made in the home loan markets, timing of changes in the consumer and commercial lending sector can differ. Some lenders may quickly pass on a cut, some in full, some in part. Others may wait before changing their lending rates, some act ahead of a decision. Differences in the amount of any rate change and the speed at which it is implemented by a lender may vary for variable and fixed rate loans. A key reason why having access to many lenders through a broker when seeking finance can be an important benefit for borrowers.
With our 80+ lender accreditations and latest tech systems, we are across how the consumer and commercial lending markets have responded to the latest RBA decision. Enabling our brokers to continue to quickly source the best available rates to suit individual customers.
Interest Rate Cut Impact on New Motorcycle Loans
Motorbike buyers applying for new loans will have their loan priced and offered on the latest lender rates. Where a lender has reduced their rates in response to the RBA decision, this may represent a reduction in the monthly repayments and total interest payable, compared with at the pre-decision rate.
Our current advertised rates across our portfolio, are updated daily and reflect the latest market rates. Buyers looking to plan their loan prior to purchasing, can use our Finance Calculator to see how our best current rates may work with repayment estimates for the machine they are considering.
Rate Cut Effect on Existing Loans
For those with an existing motorbike loan, whether or not there is any change to your loan from the RBA decision will depend on the type of rate – variable or fixed. Fixed rates apply to our Secured Motorcycle Loans, while fixed or variable rates may apply to our, and other lender, Unsecured Personal Loans.
Fixed rate loans will not change over a fixed term. The rate is secured when the finance is arranged and remains at that level until the loan is finalised. A variable rate is subject to change where a lender changes their rates. Borrowers with variable rate motorbike finance may see their rate and hence their repayments reduced as a result of the RBA February decision. Subject to individual lender decisions.
Will there be more interest rate cuts?
This is the big question that many want answered, especially those looking to buy a new machine with finance in the near future. In the media conference, which followed the RBA rate announcement, Governor Michele Bullock was asked that specific question. Ms Bullock’s response – ‘I couldn’t say’. She elaborated by saying that while the markets expect a number of cuts through to md-next year, the RBA decisions will be based on the data.
Other key points made by Ms Bullock in the media conference was that the February decision did not imply that more cuts were coming, and that the decision was a difficult one as there were arguments on both sides.
An interesting development to watch will be the commencement of the new RBA Monetary Policy Advisory Board. This creation of this new body was an outcome of the 2022 Reserve Bank Review. The new Board, which includes the Governor Michele Bullock, will be making rate decisions from March. Previously, decisions were made by the Board of the Reserve Bank. The next interest rate decision meeting will be held 31 March – 1 April.
To secure the best motorbike finance rates following the RBA February interest 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.
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