Big Four now aligned on May RBA rate increase
ANZ has revised its cash rate forecast following the latest consumer price index figures, and now expects the Reserve Bank of Australia (RBA) to lift the cash rate to 4.10% in May rather than hold at 3.85%.
The change brings ANZ into line with Commonwealth Bank, Westpac and NAB, with all four major institutions now anticipating one further cash rate increase in May, followed by an extended period of stability.
“ANZ was the last big bank holding firm on its view the RBA would only need a single hike to finish off the inflation job, but yesterday’s CPI figures have pushed the team to change their tune,” said Sally Tindall, data insights director at Canstar.com.au. “With all four major banks now pencilling in a May hike, borrowers should brace for the likelihood that rates aren’t quite done rising yet.”
For a borrower with a $600,000 home loan and 25 years remaining, a second cash rate rise in May 2026 would add about $90 to monthly repayments. Taken together, two cash rate moves over the year would raise repayments by around $180 a month.
Canstar has also modelled how current fixed and variable offers compare over a two‑year horizon. In its analysis, the comparison used the average of the five lowest variable rates listed on Canstar.com.au at 5.33%, against the average of the five lowest two‑year fixed rates at 5.31%.
On these assumptions, an owner‑occupier with a $600,000 loan and 25‑year term who selects one of the lowest two‑year fixed rates instead of one of the lowest variable rates could pay about $239 less in interest over two years, even if the cash rate remains unchanged over that period.
If the cash rate rises in May and then remains on hold, Canstar’s modelling suggests the fixed‑rate borrower could save about $2,842 in interest over the two years. In a third scenario, where the Reserve Bank delivers a May increase but then cuts rates early next year, the fixed option still comes out ahead by roughly $1,374 over the period.
“With the cash rate now in the vicinity of neutral, it's unlikely we’ll see a spate of hikes or cuts in this cycle, which makes the decision of whether to fix or not, a borderline one,” Tindall (pictured right) said.
“Canstar analysis shows that even if there are no further cash rate hikes, one of the lowest two-year fixed rates currently on offer could end up cheaper than the lowest variable rate options over the next two years.
“Fixing isn’t everyone’s cup of tea. Borrowers need to weigh up the potential savings against flexibility. If you’re planning to sell, refinance or pay off a chunk of your loan in the fixed rate period, it might not meet your needs.”
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