Major Banks Hold May Rate Hike Call Despite Softer CPI — What Borrowers Should Do Before May 5

Major Banks Hold May Rate Hike Call Despite Softer CPI — What Borrowers Should Do Before May 5

Australia's latest inflation data showed a slight softening in the quarterly trimmed mean CPI, raising hopes among some borrowers for a pause in rate hikes. But Australia's major banks are holding firm: they still expect the Reserve Bank of Australia to lift the cash rate at its May 5 board meeting — and borrowers need to prepare.

The Data: Softer but Still Hot

According to the Australian Bureau of Statistics, the Consumer Price Index rose 4.6% annually for the March 2026 quarter. While the quarterly trimmed mean measure came in slightly below some forecasts, it remains well above the RBA's 2-3% target band.

The cash rate currently sits at 4.10%, effective since March 18, 2026. The RBA's next decision is due at 2:30 pm AEST on Tuesday, May 5, 2026.

Why the Major Banks Are Not Backing Down

The four major banks — ANZ, CBA, NAB, and Westpac — have maintained their forecasts of a rate increase at the May meeting. Their reasoning:

• Inflation remains structurally elevated, particularly in services, rents, and insurance.
• Labour market remains tight, with unemployment at 4.3% as of March 2026 (ABS).
• The RBA has signalled it needs to see sustained progress toward target before easing policy.

A 25 basis point hike would push the cash rate to 4.35% — a level last seen in late 2023.

What This Means for Mortgage Holders

For borrowers on variable rate mortgages, another rate hike means higher monthly repayments. On a typical $800,000 mortgage, a 25bp increase adds approximately $130/month to repayments.

For those yet to purchase or refinance, waiting may not be the answer — rates may not fall meaningfully until late 2026 at the earliest, according to some major bank forecasts.

Non-Bank Lenders: A Different Rate Landscape

Unlike the major banks, non-bank lenders such as MPFG Capital do not directly price off the RBA cash rate in the same way. Non-bank lending rates are influenced by wholesale funding markets, and in some cases can offer more competitive options for specific borrower profiles — including:

• Self-employed borrowers on Alt Doc products where income assessment differs from standard serviceability calculations
• Investors and commercial borrowers where pricing structures differ significantly from standard residential rates
• Borrowers with complex income who may not qualify for the lowest advertised bank rates regardless of the RBA cash rate

MPFG Capital's Position

MPFG Capital currently offers competitive rates across its residential and commercial product suite. Our pricing reflects our direct funding relationships rather than just the RBA cash rate movement.

If you are approaching a fixed rate expiry, considering refinancing, or exploring options before rates potentially rise further, speaking to an MPFG Capital specialist now — rather than after May 5 — gives you the most options.

Key Dates to Watch

• May 5, 2026, 2:30 pm AEST — RBA cash rate decision
• May 6, 2026 — Governor's press conference and updated economic forecasts

This article is general information only and does not constitute financial advice. Always seek independent advice tailored to your personal circumstances before making financial decisions.