The Big Four banks May RBA rate hike call is now aligned. All four major lenders, Commonwealth Bank, National Australia Bank, Westpac and ANZ, expect a 25 basis point increase in May following January’s 3.8% CPI print.
That level remains well above the Reserve Bank of Australia target band of 2% to 3%. For mortgage holders, the implications are immediate.
For markets, the alignment is significant.
The Mortgage Impact in Real Dollars
Let’s examine the numbers. An $800,000 owner occupier loan at 6.0% variable would likely move closer to 6.2% if the RBA lifts the cash rate by 0.25% and banks pass through approximately 0.20%. That adds roughly $107 per month. Annually, that is $1,284.
A $1.2 million loan would rise by around $161 per month under the same assumptions. For households already managing elevated grocery, insurance and energy costs, that increase is material. According to industry data, around one third of borrowers are currently on variable rates above 6%. That cohort will feel the sharpest adjustment if lenders reprice quickly.
This is not theoretical. Repayment notices typically follow within weeks of an RBA decision.
Why All Four Banks Have Turned Hawkish
The consensus did not emerge in isolation. CBA economists highlight trimmed mean inflation running near 3.9%, still above the target range. NAB has pointed to services inflation above 4% and rents rising more than 5% annually, suggesting domestic price pressures remain entrenched. ANZ, previously more cautious, shifted its stance after wage growth showed renewed momentum near 3.8%. Westpac modelling suggests the cash rate could approach 4.6% by year end if inflation fails to moderate.
Unemployment near 4.2% provides the central bank with flexibility. Labour markets remain tight.
Inflation remains sticky. That combination limits room for easing. Interest rate markets now price high probability of a May increase, a sharp shift from earlier in the quarter.
Fixed Versus Variable, A Practical Framework
For borrowers, the decision is increasingly tactical. Two to three year fixed rates across the majors are currently sitting between 5.49% and 5.79%, offering a modest buffer compared to many variable products above 6%.
Fixing may make sense if your variable rate exceeds 6.1% and repayments already absorb more than 30% of household income. It also suits borrowers who value certainty. Predictability matters during volatile periods.
However, remaining variable may appeal if you expect rate cuts within the next two years, or if you maintain a substantial offset balance that cushions short term volatility. Refinancing calculations can be meaningful. A $600,000 loan switching from 6.24% variable to 5.69% fixed could save several thousand dollars across a two year period, depending on structure.
Break costs must be considered. So must clawback provisions. Every loan is different.
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Broader Market Implications
Higher rate expectations are already influencing equity sectors. Rate sensitive retailers such as Wesfarmers and JB Hi-Fi have experienced mild volatility as investors reassess discretionary spending outlooks. Property activity shows mixed signals. Listings are higher year on year, yet clearance rates in Sydney and Melbourne remain resilient near the high 60% range.
Bond yields have firmed. Cash products look more competitive. Super funds are gradually tilting defensively, increasing allocations to fixed income as yields above 4% provide attractive income alternatives.
The macro setting is shifting again.
What Happens Next
The next RBA statement will be critical. If Governor commentary reinforces concern around inflation persistence, markets will likely move quickly to price further tightening risk. Variable borrowers would see that pressure almost immediately.
Rate repricing letters do not wait long. For households carrying large balances, reviewing loan structures before the May meeting may provide optionality. Even if rates eventually fall in 2026 or 2027, near term cash flow stability can be valuable. The alignment of all four major banks is not noise. It reflects a genuine reassessment of inflation risk.
Borrowers now face a decision window. That window may narrow quickly.