Westpac Forecasts 3 More Rate Hikes by Aug 2026

The RBA has already raised the cash rate twice in 2026 - in February and March - bringing it to 4.10%. Now Westpac is forecasting three more hikes: in May, June and August. If that plays out, the cash rate would reach 4.85% by the end of August, its highest level since November 2008. The next RBA board meeting is less than two weeks away. For first home buyers who are currently in the market, running numbers, or trying to figure out how much they can borrow, the timing of this warning matters.

What Westpac is predicting

Westpac's economics team is forecasting the Reserve Bank of Australia will deliver three consecutive 25 basis point increases at its May, June and August meetings. Each individual hike is modest - a quarter of a percentage point. But stacked on top of the two hikes already delivered this year, the cumulative effect is significant.

The driver behind the forecast is persistent inflation. RBA Deputy Governor Andrew Hauser has flagged that inflation remains too high, and that supply constraints limit how quickly the economy can absorb shocks. Markets are pricing in at least one more hike, with the May decision being widely watched as the clearest signal of the RBA's direction for the rest of the year.

It is worth noting that this is a forecast, not a certainty. Whether Q1 2026 inflation data gives the RBA reason to pause will be central to what actually happens. Westpac's track record on rate predictions, like any bank's, is imperfect. But the market consensus has shifted meaningfully toward at least one or two further hikes.

What three more hikes would do to repayments

The practical impact depends on your loan size and how much of your loan is variable rate. Using Westpac's own modelling as a reference point:

• $600,000 variable loan, 25 years remaining: monthly repayments would rise by approximately $276 from the May hike alone. If all three predicted hikes land, monthly repayments could be up by around $457 by August compared to today.
• For the full year 2026 (including the February and March hikes already delivered): a $600,000 borrower is looking at approximately $3,280 in additional repayments compared to a scenario with no hikes this year.
• $1,000,000 loan: the annual repayment increase across all 2026 hikes is estimated at around $5,466.

These are estimates based on variable rate loan structures. Fixed rate borrowers are insulated from changes until their fixed period ends. Westpac's lowest advertised fixed rate is currently 6.29% on a two-year term, reflecting where the market expects rates to settle.

What this means for first home buyers

If you are currently assessing what you can borrow, higher rates reduce your borrowing capacity. Banks assess your ability to repay at the loan rate plus a 3% buffer (the APRA serviceability buffer). That buffer does not change when the cash rate rises, but the base rate does - which means the assessed repayment amount increases and your maximum borrowing power drops.

Here are the practical implications to consider:

• Pre-approval time pressure: A pre-approval reflects your borrowing capacity at the time it is issued. If rates rise between approval and settlement, your capacity may be reassessed. Talk to your lender about the approval conditions.
• Budget stress-testing: If your repayment comfort is already close to the limit, model what happens at 4.85%. A rate shock test now is far more useful than discovering the problem after settlement.
• First Home Guarantee advantage holds: The 5% Deposit Guarantee Scheme remains available with no income cap changes announced. The LMI saving is worth more in a rising rate environment because every dollar not spent on LMI is a dollar reducing your loan balance.
• Fixed rate window: Banks have already moved fixed rates up in anticipation of RBA decisions. The window to lock in below-forecast rates may be narrowing, but fixing is a call best made with a broker who can compare your specific loan structure and risk tolerance.
• QLD grant deadline approaching: Queensland's $30,000 FHOG for new home contracts expires June 30, 2026. If you are in that window, the deadline is real regardless of what the RBA does.

How scheme eligibility is affected

Rising rates do not directly change which government schemes you may be eligible for, but they affect how far your deposit goes and what price range remains affordable. The First Home Guarantee price caps remain unchanged (for example, $900,000 in NSW, $700,000 in QLD). If rate rises push monthly repayments on those price-capped properties past your serviceability limit, you may find the eligible price range narrows in practice even if the cap on paper stays the same.

The FHSS scheme is worth revisiting in a higher rate environment. Every dollar saved through concessionally taxed super contributions reduces the deposit gap, which reduces the loan amount, which reduces your exposure to rate volatility over the life of the loan.

Run the numbers

Use these tools to understand how the current rate environment affects your specific situation:

• Interest Rate Shock Tester - see exactly what your repayments would look like at 4.60%, 4.85%, and 5.10% so you can stress-test before the RBA meets
• Borrowing Power Calculator - model how much you can borrow at different rate scenarios, with and without government scheme boosts
• Grant Stacker - see every grant, concession and scheme available in your state to reduce the cash you need upfront
• FHSS Calculator - calculate how much deposit you can build through your super fund at a lower tax rate