30 of 33 economists tip a May 5 RBA hike. Here's what each scenario costs a $600k investor

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

Four days from now, the Reserve Bank Monetary Policy Board sits down for its May 5 cash rate decision. The number that lands at 2:30pm Sydney time will reset the cost base on every variable rate investor mortgage in the country, and it will reprice fixed rate offers within hours.

Markets are leaning hard one direction. A Reuters poll of 33 Australian economists taken between April 27 and 30 found that 30 of them expect the RBA to lift the cash rate by 25 basis points to 4.35%. ASX 30-day interbank cash rate futures imply roughly an 86% probability of the same outcome. All four major banks now sit on the same forecast.

The interesting question is no longer "will they hike on May 5?" It is "what comes after May 5?", and that is where the analyst views split. Yesterday's piece on the March CPI release covered the data behind the move. This one looks at the scenarios on the table for May and beyond, with the cash flow consequences of each on a typical Australian investor mortgage.

What the Market Has Priced In

The current cash rate is 4.10%, set at the March 18 meeting after a 5-4 split board vote. That was the second hike of 2026, following February's lift from 3.60% to 3.85%. The RBA has now hiked at consecutive meetings, which is itself a signal that the board is no longer confident underlying inflation is heading back into the 2-3% target band on its own.

The market view on May 5 has firmed considerably since the March 26 ABS CPI release, which printed at 4.6% headline and held the trimmed mean at 3.3%. The hot inflation print, layered on top of the Iran-driven 32.8% monthly jump in fuel prices, gave the hawkish camp clear data to lean on.

Specifically:

• ASX 30-day futures are pricing the May contract at levels consistent with roughly an 86% chance of a 25bp move to 4.35%.
• The Reuters poll has 30 of 33 economists expecting a hike. Of the three holdouts, none are forecasting a cut.
• All four major banks now agree on a 25bp May hike. Where they disagree is the path beyond.

The Big 4 Forecast Split

The hawk-dove split inside the Big 4 is meaningful because it determines what variable repayments look like by the end of 2026.

CBA, NAB and ANZ: One more 25bp hike to 4.35% on May 5, followed by a hold for the rest of the year. CBA's head of Australian economics Belinda Allen describes it as "another line ball decision." This view assumes the May hike, plus the lagged effects of the February and March moves, will be enough to anchor inflation expectations and bring the trimmed mean back toward target by Q3.

Westpac: The most aggressive Big 4 view. Chief economist Luci Ellis (a former RBA assistant governor) has the May 5 hike "locked in" and expects two more 25bp moves at the June and August meetings, taking the cash rate to a terminal 4.85% by August. That would be the highest level since the GFC. Ellis argues the March CPI data has the RBA's "inflation warning lights flashing bright red" and that pass-through from the fuel shock to broader prices is already showing up in food, building products, and services.

The Reuters poll's broader view: 18 of 31 economists expect the RBA to hold at 4.35% through year-end, but more than a third now see at least 4.60% by the end of Q3. A month ago, no economists held that view. The tail of forecasts has moved sharply hawkish in a matter of weeks.

The one scenario that almost no one is forecasting is a hold or a cut. That asymmetry matters when you think about what to do with your mortgage.

What Each Scenario Costs a $600,000 Investor Mortgage

Forecasts and probabilities are useful, but the question landlords actually need to answer is: what does this do to my monthly cash flow?

The numbers below assume a $600,000 variable rate investor loan, principal and interest, 30 years remaining, with the move passed through in full to a starting variable rate of 6.50%. That is a representative current investor variable rate after the February and March pass-throughs. Each scenario is the cumulative impact from today.

Scenario 1: RBA holds at 4.10% (the unlikely case). No change to your repayment. Highly improbable based on current pricing, but worth pricing as a sanity check. If the May CPI data or the labour force release surprises sharply to the downside between now and May 5, this is the scenario that comes back into play.

Scenario 2: One 25bp hike to 4.35% on May 5 (the consensus). Your variable rate moves to roughly 6.75%. Monthly repayment rises by approximately $95, or close to $1,150 per year. This is the CBA, NAB and ANZ path, and it is what variable rate investors should plan for as a base case.

Scenario 3: Two hikes to 4.60% by Q3. Your variable rate moves to roughly 7.00%. Monthly repayment rises by approximately $192 from current, or around $2,300 per year. This is the path that more than a third of polled economists now consider plausible.

Scenario 4: The Westpac call - three hikes to 4.85% by August. Your variable rate moves to roughly 7.25%. Monthly repayment rises by approximately $290 from current, or close to $3,500 per year. Across two investment properties at this scale, you are looking at $7,000 in additional annual interest costs.

The Roy Morgan modelling cited in Yourmortgage.com.au projects mortgage stress affecting 1.6 million Australians (30.3% of borrowers) if the May hike lands as expected, up from 24.9% post-March. Investor borrowers with multiple loans are over-represented in the higher stress brackets.

Calculate Your Own Numbers

The scenarios above use a $600,000 loan at 6.50% as a representative starting point. Your exact position depends on your current rate, balance, and remaining term. Plug your own figures in below to see what each scenario does to your repayment.

To compare specific rate moves head to head, the interest rate calculator lets you model the difference between two rates on the same loan, which is the cleanest way to see what a 25bp or 50bp move actually costs you.

The Refinancing Window Is Effectively Closed

Landlords sometimes ask whether there is time to lock in a fixed rate before the May 5 decision to avoid the hike.

In short, the window has already closed. As covered in our Big 4 fixed rate review, every major bank pushed advertised fixed rates above 6% during the first two weeks of April. Investor fixed rates typically sit 20 to 30 basis points higher again, so realistic investor fixed pricing across the Big 4 currently runs from about 6.20% to 6.60%, depending on lender and term.

The pricing has already absorbed expectations of a May hike. Banks set fixed rates with reference to where they expect the cash rate to sit over the term of the fix, so by the time you call your broker on May 1, the May 5 outcome is largely already in the rate you are quoted. A locked-in fix today is buying certainty, not arbitrage.

That said, certainty has real value if you are running close to your serviceability limit, or if a Westpac-style 4.85% scenario would tip a property from cash-flow positive to negative on your numbers. A 2-year or 3-year fix at 6.30% caps your downside on the variable side, and your deduction forecasting at tax time becomes cleaner.

If you want to keep optionality, a split loan (part fixed, part variable) gives you partial protection without closing the door on the variable rate moving back down later in 2026.

What Variable Rate Pass-Through Looks Like

If the RBA does hike on May 5, the timing of when your repayment changes depends on your lender. Following the March 18 hike, the pattern was:

• CBA, NAB, ANZ: Pass-through effective March 27 (nine days after the decision).
• Westpac: Pass-through effective March 31 (13 days after the decision).

Apply the same pattern to a May 5 hike and you are looking at a new variable rate effective around May 14 to May 19. The first repayment at the new rate typically lands four to six weeks later, depending on your billing cycle, so the cash flow hit shows up on June statements for most investors.

That timing matters at EOFY. Any extra interest paid in June 2026 is captured in your 2025-26 tax return as a deductible expense. Beyond that, the bulk of the new rate's impact lands in 2026-27.

What This Does to Your Tax Position

Every dollar of extra mortgage interest is fully tax-deductible against your rental income, so a portion of the cost comes back at tax time. The exact return depends on your marginal rate.

For a $600,000 investor loan under the Westpac scenario (close to $3,500 in additional annual interest):

• 32.5% marginal bracket: Deduction returns $1,138. Net cash flow hit close to $2,360.
• 37% marginal bracket: Deduction returns $1,295. Net cash flow hit close to $2,205.
• 45% marginal bracket: Deduction returns $1,575. Net cash flow hit close to $1,925.

The deduction softens the blow but does not eliminate it. If you are negatively geared and your taxable income is already below the deduction's break-even point, the benefit is closer to zero. The mechanics matter here: deductibility is not a get-out-of-jail card, just a partial offset.

Tracking the higher interest from day one of the new rate is what separates an accurate EOFY claim from one you have to reconstruct from bank statements in October. The landlord expenses guide covers what to log, and the EOFY checklist is worth working through before your next accountant meeting.

What to Do This Week

You cannot control the May 5 outcome. You can control how prepared you are for each scenario.

Run your own scenarios. Use the calculators above to model your specific loan at the four cash rate paths (4.10%, 4.35%, 4.60%, 4.85%). Know your monthly repayment under each before the decision lands.

Re-baseline cash flow. If your property is comfortably positive at 4.10% but tips into negative cash flow at 4.85%, you want that conversation with yourself now, not in August.

Get a fixed rate quote even if you do not plan to fix. It costs you nothing to know the number. If a 6.30% 2-year investor fix would close the gap on a stretched property, it is worth having on the table as an option.

Have your records current to April 30. Whatever the RBA does on May 5, June 30 still arrives the same week of every year. The closer you are to up-to-date on rental income, expenses, and interest charges before the rate moves, the less reconstruction work you have at EOFY.

The RBA decision lands at 2:30pm Sydney time on Monday, May 5. The data is in, the market is priced, the Big 4 are aligned on May, divided on August. Your job between now and then is to know your numbers under each path.

Frequently Asked Questions

Will the RBA raise rates on May 5, 2026?

Markets and economists overwhelmingly expect a 25 basis point hike to 4.35%. A Reuters poll taken April 27-30 found 30 of 33 economists tipping a hike, and ASX 30-day futures pricing implies roughly an 86% probability. The decision is announced at 2:30pm Sydney time on May 5.

What is the current RBA cash rate?

The RBA cash rate sits at 4.10%, set on March 18, 2026 after a 5-4 split board vote in favour of hiking. It is the second hike of 2026, following the February move from 3.60% to 3.85%.

How much will a 25bp May hike cost a $600,000 investor mortgage?

A 25 basis point increase passed through in full adds roughly $95 to $100 per month to a $600,000 variable investor loan with 30 years remaining. Across a year that is around $1,150 in additional interest, before any tax deduction.

What does Westpac's 4.85% terminal rate forecast mean for landlords?

Westpac's call is for hikes in May, June and August totalling 75 basis points. On a $600,000 investor loan that path adds about $290 per month, or close to $3,500 per year, in additional repayments. CBA, NAB and ANZ expect just one more hike to 4.35% then a hold.

Should I fix my investment loan before the May 5 RBA decision?

Big 4 fixed rates already sit above 6% across all four major banks, with investor pricing typically 20 to 30 basis points higher than owner-occupier. Fixed rate pricing has effectively already priced in a May hike, so locking in now offers certainty rather than a discount. The decision turns on whether you value certainty over flexibility, not on whether you can outsmart the market.

Is RBA cash rate increase tax-deductible for landlords?

The cash rate move flows through to your variable mortgage rate, and the higher interest is fully tax-deductible against your rental income. The deduction is a fraction of the cost paid (between 30 and 47 cents per extra dollar depending on your marginal tax bracket), so cash flow tightens even when the tax bill softens.

When the rate moves, your cash flow moves with it. Propkt tracks the interest, the repayment changes, and every other deductible expense across each of your properties, so you walk into your accountant's office in July with the actual numbers, not a rough estimate. Get started free.