Westpac Predicts Two More Rate Hikes After May — How Non-Bank Borrowers Can Prepare

Westpac has dramatically revised its interest rate forecasts, now predicting two additional RBA cash rate hikes beyond May 2026 — which would push Australia's cash rate to its highest level in nearly two decades. The revision signals that the rate tightening cycle is far from over, with major implications for borrowers across all loan types.

What Westpac Is Now Forecasting

Australia's second-largest bank has effectively torn up its previous rate roadmap. According to The Adviser (30 March 2026), Westpac now expects the RBA to deliver two further rate increases after the widely anticipated May 2026 hike — a hawkish revision that surprised many market participants.

If this forecast proves accurate, the cash rate could reach levels not seen since the early 2000s — an era when borrowers were navigating a fundamentally different economic landscape. The current cash rate stands at 4.10%, effective 18 March 2026, with the next RBA decision scheduled for 5 May 2026.

The Data Supporting a Hawkish Outlook

Westpac's revised forecast is grounded in persistent inflationary pressure:

• CPI (February 2026): 3.7% annual change — still above the RBA's 2–3% target band (ABS)
• Unemployment (February 2026): 4.3% — a labour market that remains relatively tight (ABS)
• GDP growth (December 2025 quarter): 0.8% — modest but positive, giving the RBA room to continue tightening (ABS)

The combination of above-target inflation and resilient employment data gives the RBA justification to maintain pressure on monetary policy settings.

The Real-World Impact on Borrowers

Each 0.25% increase in the cash rate adds approximately $65–80 per month to repayments on a $500,000 variable rate home loan. Two additional hikes would translate to roughly $130–160 per month in extra costs — on top of the significant increases already absorbed since the tightening cycle began.

For self-employed borrowers, the pressure is amplified. Irregular income makes higher repayments harder to absorb, and traditional banks may tighten their serviceability assessments further as rates rise.

How Non-Bank Lenders Provide Certainty in Volatile Times

While major banks pass rate increases directly to variable borrowers, non-bank lenders like MPFG offer strategic alternatives:

Fixed Rate Products: Locking in a fixed rate before May or subsequent hikes can protect borrowers from further increases. MPFG's product range includes fixed-rate options designed for self-employed and alternative documentation borrowers.

Alt Doc Loans for Self-Employed: Borrowers who cannot provide traditional payslips — including sole traders, company directors, and small business owners — can access MPFG's Alt Doc loan products. Income is assessed via BAS statements, accountant letters, or bank statements, irrespective of what the cash rate does.

Refinancing from Major Banks: Borrowers currently sitting on high variable rates with the Big Four may find competitive non-bank alternatives that better serve their financial profile and cash flow needs.

Practical Steps Before the May Decision

1. Review your loan structure now — assess whether a variable rate still suits your risk tolerance
2. If self-employed, explore whether your current loan is optimised for rate certainty
3. Contact an MPFG broker before the 5 May decision to understand your fixed rate and refinancing options
4. Model the scenarios — understand your repayments at 4.35%, 4.60%, and higher

The window before 5 May is narrow. Borrowers who act now can position themselves ahead of what Westpac believes may be an extended tightening cycle.

The next RBA cash rate decision is scheduled for 5 May 2026 at 2:30pm AEST. This article is for informational purposes only and does not constitute financial advice. Loan approval is subject to credit assessment and eligibility criteria.