RIC loans are used by farmers primarily on plant and improvements. Photo: RIC

THE Regional Investment Corporation’s (RIC) farm business loan variable interest rate is changing from 2.31 per cent to 3.04 per cent as of today, the Australian Government’s RIC announced today.

Farm business loans include the Drought, AgBiz Drought, AgriStarter and Farm Investment loans.

The variable interest rate for the Plantation Loan for new plantations and replanting 2019-20 Black Summer bushfire-damaged plantations, is changing from 1.89pc to 2.62pc.

The RIC’s variable interest rate is linked to the Australian Government 10-year bond rate averaged over a six-month period and applied retrospectively, smoothing the pace at which it changes.

It is not linked to the Reserve Bank of Australia (RBA) cash rate.

A small portion of the variable interest rate covers the RIC’s administrative costs.

RIC acting chief executive officer Paul Dowler said many farm business loan customers are continuing to benefit from the concessional nature of the loans.

“RIC interest rates are concessional compared with commercial rates and the manner changes are applied offers more comfort for financial planning,” Mr Dowler said.

 “At 30 June we still had 84.3pc of farm business loan customers benefiting from the interest-free terms of their RIC loan.

“Most farm-business loan customers are not impacted by the change in the RIC loan interest rate, resulting in greater savings for this cohort.

“RIC loans have saved farm businesses money they would have otherwise spent on principal and interest repayments together.”

 Farm businesses with a RIC loan benefit from the RIC’s concessional variable interest rate and interest-only terms over the first five years of the loan, followed by principal and interest repayments for the remainder of the 10-year loan term.

 Existing customers will have the variable rate change applied to their loan from 1 August 2022.

All new farm business loan applications will be subject to the new rate.

Effective February 1, the RIC farm business loan variable interest rate lifted to 2.31pc from 2.17pc.

Rates will next be reviewed in February 2023.

Source: RIC