Rates are set to rise, which means businesses should secure funding sooner rather than later to lock in a great deal.

Home Loan Interest rates are starting to rise.

The RBA recently announced the first rate rises we’ve seen in years, and according to Westpac Chief Economist Bill Evans they’re just the beginning. Five further increases have been predicted between June and November to take the cash rate from 0.1% last April to 1.5% by the end of the year. And he expects a further two increases next February and March to take the official cash rate to a peak of two percent in 2023.

Car loans and business loans are also on the UP!

Lenders have been preparing for some time now, with the Asset Finance market starting to increase their rates from the end of 2021. As an example, if we look at the top 15 lenders on our panel, more than 85% increased their pricing at least once over the past few months.

We’ve seen increases from 0.25% to 1.5%, and the lowest rate we could offer in this space went up from 2.9% to 3.49% since the trend started.

Business working capital is preparing to follow

In the working capital space, we haven't seen a price movement in response to the predicted rate increase as yet, however, we have started to see policy changes. As an example, we have lenders moving from a fixed rate to a fixed rate plus the RBA’s interest rate so they can pass any future rate rises onto their customers.

How might this impact small business owners?

In response to cash rate changes, the lending rate for small businesses rises more quickly than it falls. Predictions say that the cash rate will keep increasing up to 1.5% or 2% in 2023/24. This means it’s better for business owners to secure a loan sooner rather than later, to fix the total interest they’ll pay.

As an example, customers could be paying between $1,800 and $2,550 extra interest on a $60,000 loan if they don’t secure a loan before the forecasted rate rises.

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