Will the RBA increase interest rates in May 2022? Homebuyers watch for the next move

Houses along Australian coast.

The Reserve Bank of Australia is widely expected to lift official interest rates in the coming months, with markets split 50-50 on whether the first move will be made at its May 5 meeting or a month later.

Economists at Westpac expect the Board will wait until June to begin the tightening cycle, but have acknowledged that a one-off increase of 40 basis points could be in order.

“Because the current cash rate is an unusual 10 basis points we had expected that the first move would be 15 basis points to restore the cash rate to 25 basis points,” said Westpac chief economist Bill Evans.

“However, given our expectations of a rapid further increase in underlying inflation and a forecast fall in the unemployment rate for April… to a 48 year low of 3.8% we expect the Board will decide on a bolder initial lift in the cash rate.”

Such a move would bring the cash rate to 0.5%. Assuming lenders lift mortgage rates by a similar amount, this could increase the average variable rate in our database to 3.43% p.a.

On a $500,000 mortgage taken out over 25 years (OO, P&I), a borrower could expect their repayments to go up by $105 per month, or $1,260 over the year.

Also of concern is the large number of borrowers who will be exiting their fixed loan terms and facing a vastly different interest rate environment.

RBA playing catch-up with central bank peers

In the minutes for its April meeting, the RBA noted that central banks around the world had already started down the path of tightening monetary policy in response to runaway inflation. 

This month, the Bank of Canada and the Reserve Bank of New Zealand both decided to increase their policy rates by 50 basis points.

In the US, Federal Reserve Chairman Jerome Powell also signalled a willingness to front-load any upcoming rate hikes, telling an International Monetary Fund panel that a 50 basis point increase “will be on the table for the May meeting.”

The RBA’s patient stance has made it an outlier among many developed countries, but its April policy statement contained strong clues that a shift in policy was around the corner. 

This week’s CPI data will provide some much-needed clarity on the state of the economy and whether the inflation the RBA has so far downplayed is here to stay. 

For more information about mortgage and lending trends, head over to our home loan statistics page. And if you’re in the market for a home loan, visit our home loan comparison page, or browse the selection below.

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Last updated 22 July 2024 Important disclosures and comparison rate warning*
  • Discount Great Rate Home Loan

    Owner Occupier, Principal & Interest, LVR<80%, over $150k

    interest rate
    comparison rate
    Initial monthly repayment
    6.04% p.a. variable
    6.06% p.a.

    An easy to use Home Loan with no establishment fee and no monthly or annual fees. Minimum deposit of 20% is required. Mozo Experts Choice Awards - Investor Home Loan Award 2024^.

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  • Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR<70%

    interest rate
    comparison rate
    Initial monthly repayment
    6.25% p.a.
    fixed 3 years
    6.20% p.a.

    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

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  • Low Rate Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.20% p.a.

    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

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  • Discounted Home Value Loan

    Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    6.14% p.a. variable
    6.14% p.a.

    Enjoy competitive rates for owner occupiers. Enjoy unlimited free extra repayments. Flexibility to redraw additional payments for free. No ongoing monthly service fee. Settlement fee waived on new borrowings from $50,000 (T&Cs apply).

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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