Ouch! Medical Equipment Finance Rates Trending Up

The big four banks are predicting that their average cost of funds will increase by 85 to 110 points by mid-2011. Their ‘cost of funds’ is not easily defined, but with tighter regulations on liquidity resulting from the GFC, they are now more heavily (>50%) reliant on customer deposits. The best 5-year term deposits are currently 7.3%, and the long-term wholesale funds remain volatile.

So, if you need to invest in Equipment Upgrades or additional systems within the next 12 months, now would be a good time to get a rate lock. There’s an upfront cost that increases with the length of the lock, but it’s easily justified in view of the current trend. Please note, however, that if rates turnaround, you could be subject to the lender’s need to recover what they call ‘economic cost’, which is another way of saying ‘break cost’. (We can’t have it both ways.)

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