All four major banks forecast a 0.25% hike to 4.35% at the RBA's 5 May meeting. Review your borrowing power and stress test repayments before Tuesday.
The Reserve Bank of Australia meets on Tuesday 5 May, and all four major banks - ANZ, CBA, NAB, and Westpac - are predicting the same outcome: a 25 basis point increase taking the cash rate from 4.10% to 4.35%. With the decision less than 48 hours away, first home buyers and existing mortgage holders are facing a set of questions that could meaningfully affect their budgets for the remainder of 2026. Here is what the forecasts mean, and what steps are worth taking before Tuesday afternoon.
February and March already delivered consecutive 25 basis point increases, taking the cash rate from 3.85% to its current 4.10%. A May hike to 4.35% would be the third increase in four months - a cumulative 0.50 percentage point lift from the start of the year.
In practical terms, a 25 basis point increase typically adds around $90 per month to repayments on a $600,000 variable-rate mortgage, and approximately $120 per month on an $800,000 loan. Stacked on top of February and March, the total added monthly pressure on a $600,000 loan since January now sits at around $270 per month compared to rates at the start of the year.
For first home buyers who purchased near the top of their borrowing capacity in 2024 or 2025, this kind of movement warrants an immediate budget review. And for those still saving for a deposit, each rate increase also shifts the borrowing capacity calculation - typically reducing the maximum loan by around $25,000 for every 0.25 percentage point rise in the cash rate.
Beyond May, Westpac is forecasting two further hikes in June and August 2026, which would push the cash rate to 4.85% - its highest since 2008. ANZ, CBA, and NAB have not gone that far with their forecasts, but the direction is consistent across all major institutions: rates are expected to stay elevated through the second half of the year.
With another hike all but priced in, some borrowers and prospective buyers are weighing whether to lock in a fixed rate before rates climb further. SBS News reports that lending experts are advising borrowers to review their current rate, compare available options, and consider whether a fixed product makes sense for their specific circumstances.
The case for fixing is straightforward: you get repayment certainty for the term of the fixed period, protected from additional increases. If Westpac's forecast proves correct and rates rise to 4.85%, a borrower who fixed at current lender rates would be insulated from further pressure.
The case for staying variable is equally real. Fixed rates are priced to include lender expectations about future moves, so fixing now may not produce the savings it appears to at first glance. And if the RBA eases policy later in 2026 or in 2027, variable borrowers benefit from the cuts while fixed borrowers do not. Break costs on fixed loans can also be significant if you need to refinance or sell before the term ends.
A mortgage professional can model both scenarios against your current balance, remaining term, and likely selling or refinancing timeline to help you make an informed call. The decision is genuinely personal - not a one-size-fits-all answer - which is why getting the numbers in front of you matters more than following a general recommendation.
Whether the RBA hikes or holds, the lead-up to a rate decision is a useful moment to pressure-test your position:
Tuesday's RBA decision is being watched closely across the country, but the practical impact for first home buyers is less about the single announcement and more about the broader trend it represents. The rate environment of 2023 and 2024 - when cuts were expected and borrowing capacity was rising - has shifted. Planning in 2026 means working with higher rates as a baseline and treating any eventual cuts as a welcome development rather than a given.
Use these tools to understand how Tuesday's decision and the current rate environment affect your specific situation: