Key takeaways
Cash rate could surge to the highest setting since Nov 2008
5 hikes in 5 meetings would see monthly repayments rise by $457 on $600k loan
Just when many borrowers thought the worst of the rate hiking cycle might be behind them, Westpac has thrown a curveball, signalling we could be heading into a far more prolonged and painful phase of tightening than most expected.
Well, Westpac has upped its cash rate forecast for the year, tipping the RBA will deliver three further rate hikes in 2026.
The bank now expects the RBA to increase the cash rate by 0.25 in May, June and August, making it a total of five hikes in as many meetings.
This would take the cash rate to 4.85%, a level not seen since November 2008, when the cash rate was coming down on the back of the Global Financial Crisis (GFC), according to Canstar.com.au.
Westpac has said the prolonged disruption to fuel supply, the faster-than-expected pass-through to goods and services and the RBA’s restrictive policy stance will push the cash rate to 4.85% by August, despite the temporary halving of the fuel excise.
The bank expects the RBA to start easing the cash rate from 2028, with four cuts pencilled in.
Canstar.com.au’s data insights director, Sally Tindall, says:
“Borrowers could be in for a tough couple of years if Westpac’s forecast for three further hikes and no rate cuts til 2028 comes to pass.
While the other big banks are tipping just one more hike, Westpac is now forecasting a far more aggressive path, which would take the cash rate to levels we haven’t seen since the fallout from the GFC.
The flow-on effect of higher fuel costs has already started pushing up prices elsewhere. The RBA may feel like it has to act because once prices go up, they rarely come back down.
The government might have tried to soften the blow by halving the fuel excise, however, if the RBA then goes and hikes the cash rate, it could turn into a merry-go-round of money passed from the bowser to the banks."
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| Current big four bank cash rate forecasts | ||
| Bank | Forecast | Cash rate - end 2026 |
| CBA | 1 x 0.25 in May | 4.35% |
| Westpac | 3 x 0.25 in May, June & August | 4.85% |
| NAB | 1 x 0.25 in May | 4.35% |
| ANZ | 1 x 0.25 in May | 4.35% |
Impact of 3 further 0.25 cash rate hikes
Canstar.com.au analysis shows if the cash rate rose by 0.25 percentage points in May, June and August, monthly repayments on a $600,000 loan and 25 years remaining would rise by approximately $276.
Including the two hikes already this year, total monthly repayments could increase by $457 by August.
| Impact of three more 0.25 rate hikes on monthly repayments | ||
| Debt owning | May + June + August | Total since start of year
(5 hikes) |
| $600,000 | +$276 | +$457 |
| $800,000 | +$368 | +$609 |
| $1 million | +$460 | +$762 |
Source: Canstar.com.au. Based on an owner-occupier paying principal & interest with 25 yrs remaining in Feb 2026 on the RBA av. variable rate. Calculations assume banks pass on the hikes the month after. Changes are to minimum monthly repayments.
According to Canstar, if the hikes play out as Westpac expects, someone with a $600,000 mortgage at the start of the hikes, would end up paying an extra $3,280 in monthly repayments in 2026, compared to if there had been no hikes this year.
This means that on a $1 million mortgage, it would be approximately $5,466 extra for the year in monthly repayments and even more in interest charges.
Ms Tindall explains:
“There are likely to be more than 40 lenders offering at least one variable rate under 5.75 per cent after the March hike washes through. Refinancing could potentially negate a couple of these hikes.
Even if you’re not ready to switch lenders, it’s worth negotiating with your bank. In a competitive market, loyalty doesn’t pay, but a simple phone call asking for a sharper rate might.”
As I always say, in this environment, the winners won’t be those who react emotionally to rising rates, but those who stay strategic: reviewing their lending, managing cash flow, and making smart, long-term decisions that position them to come out the other side stronger.
