Commercial loan rates on some credit facilities may rise with the RBA 0.25% March cash rate rise, with competitive rates accessible through Business Finance. While most lending markets react to Reserve Bank Monetary Policy decisions, the business finance sector is diverse and can remain highly competitive. The immediate effect of the decision may be felt on existing variable rate loans and new loans.
Business owners considering taking on credit to support their operation or to acquire new assets, will no doubt be interested in understanding why rates have again been increased, and the future prospects. Consideration may also be given to how the economic conditions may affect not only the cost of financing, but costs and trade in their own sector.
Backgrounding March Rate Rise
Coming so fast on the back of the February cash rate hike, the March decision may have taken some by surprise. But after several weeks of the Middle East war global fallout, especially on petrol prices in Australia and supply and transport routes, it was highly anticipated.
While the surge in petrol prices was significant to the decision, RBA Governor, Michele Bullock explained that Australia’s rate of inflation was already high and required addressing through monetary policy. Interest rates are the central banks only tool to address high inflation.
An interesting outcome of the Board meeting was that, unlike the unanimous February decision, the March decision was a split vote – 5 for an increase, 4 for a hold. When questioned on this issue, Governor Bullock said the difference was only about the timing of the next rate rise, not the direction. All agreed that a rate increase was required but some board members wanted more time to see how events would play out.
The rate of inflation, currently at 3.8%, is the highest priority for the RBA Board. Their target is 2-3% and some analysts have tipped the rate may edge close to 5%. Ms Bullock said when the rate becomes too high it is much harder to address. The next Consumer Price Index Report – the data set on the inflation rate, is due from the ABS on 25 March.
Other significant reporting dates for business owners to watch will be the next Monetary Policy decision on Tuesday 5 May and the Federal Budget to be brought down by Treasurer Chalmers on 12 May. The Treasurer said some detail will be covered in his Pre-Budget address on 19 May in Melbourne.
Changes to Commercial Loan Rates
Businesses with existing asset loans that were secured at a fixed interest rate will not be affected by the March or any other RBA cash rate change. The rate originally secured will remain over the life of the loan. This applies to Rent-to-Own, Leasing, CHP and Chattel Mortgage rates.
Loans which may are vulnerable to Reserve Bank decisions are variable interest rate credit facilities. These include a Business Overdraft, some Unsecured Business Loans and trade loans, and lines of credit. The amount the rate will change depends on the individual lender’s decision. They may pass on the increase in full, currently 0.25%, or with a lesser or greater amount. Lenders will advise borrowers of the change.
If you have credit which is impacted by a rate increase, speak with one of our brokers about the prospects offered through refinancing with a different lender or a different credit facility. Our access to a vast commercial lending market and specialist non-bank lenders, provides our customers with opportunities for highly competitive rates. Refer to our rate tables which are constantly updated to reflect the current market, as a guide to the possibilities. If planning to take on finance for assets or cash flow support, request a quote to assist with your decision making.
Outlook for Commercial Loan Rates
While not the RBA’s main reason for increasing the cash rate, the war in the Middle East does present a major uncertainty in the economic outlook. This is not the first time that Australian finance and trading markets have been impacted by global events. How long this conflict continues may be significant to economic conditions, especially the inflation rate. The rise in petrol prices and disruption to international shipping are likely to flow through to increases in food and other markets.
While the RBA does not predict or even surmise what their future decisions will be, we can assure business owners that the best possible commercial loan rates will be available through Business Finance. Our lending market access and leverage with key lenders assure businesses that highly competitive markets rates will be secured for them.
We appreciate that this may be an extremely challenging time for many operators and our brokers are ready to assist you with financing requirements.
For your most affordable commercial loan rates and to discuss refinancing current loans, connect with Business.Finance brokers 1300 000 033.
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS
