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.

Home loan comparisons on Mozo - last updated 13 August 2022

Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
  • Variable Home Loan 70

    interest rate
    comparison rate
    Initial monthly repayment
    3.10% p.a. variable
    3.12% p.a.

    Affordable home loan rate for buyers or refinancers.. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 30% deposit required.

    Details
  • Unloan Variable

    Owner Occupier, Refinance Only

    interest rate
    comparison rate
    Initial monthly repayment
    3.14% p.a. variable
    3.06% p.a.

    For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.

    Details
  • PAYG Home Loan

    Owner Occupier, Principal & Interest, LVR<80%

    interest rate
    comparison rate
    Initial monthly repayment
    3.29% p.a. variable
    3.33% p.a.

    Low variable rate. Ideal for new home buyers or refinancers. Unlimited additional repayments. Unlimited free redraw. Application completely online. Optional 100% offset can be added for $120 p.a.. 20% deposit required.

    Details
  • Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    3.79% p.a. variable
    3.79% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid down. Free extra repayments and redraw facility. Zero fees. Min 40% deposit required.

    Details

* 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, loan amount and term entered. 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.

^See information about the Mozo Experts Choice Home Loan Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.