Back-to-Back Hikes and Counting: Why May 5 Could Change the Game
The RBA has now lifted the cash rate twice in three months — first in February, then again on 17 March, pushing the target to 4.10 per cent in a narrowly split 5–4 board decision. With lenders only just finishing the pass-through of the March increase into April repayments, brokers are already staring down the next question: will the Reserve Bank go again on May 5?
Market pricing says probably yes. ASX 30-day interbank cash rate futures, as of 9 April, imply roughly a 62 per cent probability of another 25 basis point hike at the May meeting. If it lands, the cash rate hits 4.35 per cent — a level not seen since November 2023 — and the cumulative impact on borrower capacity, client sentiment, and deal flow becomes hard to ignore.
For brokers, this is not a story to watch from the sidelines. It is a story to get in front of.
What Is Driving the Hikes?
Governor Michele Bullock and the Monetary Policy Board have pointed to a cluster of factors that made the March decision, tight as it was, unavoidable in the Board’s view. Inflation data from the second half of 2025 surprised to the upside. Capacity constraints proved more persistent than forecast. The labour market tightened again, and energy costs — partly linked to regional geopolitical tensions — added fresh upside risk to the inflation outlook.
The Board’s language has been deliberately firm. The February and March statements both emphasised that inflation returning sustainably to the 2–3 per cent target band remains the priority, and that the Board is prepared to act further if the data warrants it. Translation: the door to a May hike is wide open.
For brokers, understanding this macro backdrop matters. When a client asks “will rates go up again?”, the answer needs to be grounded in what the RBA is actually watching — not a vague “it depends”. The data is pointing one way, and the market is pricing accordingly.
How Back-to-Back Hikes Are Hitting Borrowing Capacity
Each 25 basis point increase has a compounding effect on serviceability. On a $750,000 variable rate mortgage, the March hike alone adds roughly $115 to $120 per month in repayments. On a $1 million loan, the figure is closer to $161 per month — and if May delivers another increase, borrowers are looking at an additional $300-plus per month in cumulative repayment increases since January.
More critically, borrowing capacity shrinks with every move. Industry estimates suggest each 25 basis point hike reduces maximum borrowing power by $30,000 to $40,000 for a typical household. Two hikes back-to-back means some clients who were pre-approved in late 2025 are now materially over-extended against current assessment rates — and a third hike would push that gap further.
This is particularly acute for first home buyers competing in markets like Perth and Brisbane, where Cotality’s April 2026 data shows dwelling values up 24.3 per cent and at record highs respectively. Prices are being driven by structural supply shortages, and as Cotality’s head of research Gerard Burg notes, when supply-demand imbalances are this pronounced, buyers are competing fiercely for a shrinking pool of stock. Add declining borrowing capacity to that equation and brokers face an increasingly difficult conversation with aspirational purchasers.
The APRA DTI Cap Adds Another Layer
Since 1 February, APRA’s debt-to-income lending cap has been live. Banks are now limited to issuing no more than 20 per cent of new mortgage lending at a DTI ratio of six times income or above, with separate caps for owner-occupier and investor books.
On its own, the DTI cap was manageable for most borrowers. Combined with back-to-back rate hikes, it creates a tighter corridor. Investors with large existing portfolios are bumping into DTI limits earlier. First home buyers stretching into high-cost markets are finding their applications caught between serviceability floors and DTI ceilings.
Brokers who are not actively modelling the interplay between the DTI cap and current rate settings are leaving clients exposed to pre-approval surprises. And if May delivers a third hike, the number of applications landing in this contested zone will grow.
What Smart Brokers Are Doing Right Now
The three weeks between now and the May 5 decision are not a wait-and-see window. They are a preparation window. Here is what proactive brokers should be doing:
1. Re-running serviceability on every active pre-approval
Any pre-approval issued before the March hike needs to be stress-tested against current rates — and against a scenario where the cash rate hits 4.35 per cent. If a client’s borrowing capacity drops below their target purchase price under that scenario, the conversation needs to happen now, not after settlement falls over.
2. Front-loading rate lock conversations
For clients in the pipeline, fixed rate options deserve a fresh look. Several lenders adjusted their fixed rate pricing in late March and early April, and some two- and three-year products are now pricing in the expectation of further hikes. Brokers should be presenting side-by-side comparisons of variable versus fixed scenarios so clients can make informed decisions before May 5, not reactive ones after.
3. Proactively contacting existing variable rate clients
Brokers settling 77 per cent of all residential home loans means there is a massive existing book exposed to rate increases. A short, personalised outreach — “here’s what the latest hike means for your repayments, here’s what might be coming, and here’s what we can review” — is both good service and good retention strategy. Clients who hear from their broker before the next hike feel looked after. Clients who only hear from their lender’s automated email do not.
4. Revisiting investor strategy through the non-bank lens
APRA’s DTI cap applies to authorised deposit-taking institutions — not non-bank lenders. With investor lending already up 31.8 per cent over 2025 and making up 39.7 per cent of all new lending by value, the non-bank channel is increasingly where high-DTI investor deals can still land. Brokers should ensure their panel includes competitive non-bank options and that they are comfortable articulating the trade-offs to clients — including pricing differentials, product features, and the compliance obligations that come with recommending outside the major bank panel.
5. Documenting your Best Interest Duty reasoning
In a rising rate environment where you may be recommending clients fix, switch to a non-bank, or adjust their purchase budget, your BID documentation needs to be airtight. ASIC’s focus on broker recommendation behaviour is ongoing, and a period of rapid rate movement is exactly when regulators expect to see clear, contemporaneous evidence that the broker considered the client’s circumstances, compared relevant products, and made a recommendation that prioritised the client’s interests. If your file notes are thin, this is the week to tighten them.
What to Watch on May 5
The RBA’s Monetary Policy Board will meet on Tuesday 5 May with an announcement expected at 2:30 pm AEST. Beyond the rate decision itself, brokers should pay close attention to three things:
The vote split. March was 5–4. If May is unanimous or near-unanimous in either direction, it signals how the Board sees the trajectory beyond May. A narrow vote to hold would suggest the tightening cycle is near its peak. A comfortable majority to hike would suggest more pain ahead.
The language on inflation expectations. If the Board shifts from “inflationary pressures picked up materially” to softer phrasing, it may indicate the peak is close. If the language hardens, prepare for a prolonged higher-rate environment.
Any forward guidance on the June meeting. The new RBA communication framework means the Board’s post-meeting statement and the Governor’s press conference carry real forward-looking signals. Listen for whether June is being kept firmly on the table or quietly de-emphasised.
The Bigger Picture for Brokers
Two consecutive hikes — with a probable third incoming — represent the most aggressive tightening sequence since 2022–23. For brokers, the operational impact is real: tighter borrowing capacity, more complex client conversations, greater compliance scrutiny, and a pipeline that requires more active management than it did six months ago.
But there is an opportunity here too. Periods of rate uncertainty are when consumers most need expert guidance. They are when the broker value proposition — personalised advice, access to a broad lender panel, proactive communication — matters most. The brokers who come through this period strongest will be the ones who used the weeks ahead of each decision to prepare, not react.
May 5 is three weeks away. The preparation window is open. Use it.
Disclaimer: This article is for general information and professional development purposes only. It does not constitute legal, compliance, or financial advice. Brokers should consult their aggregator’s compliance team and, where required, seek independent legal advice regarding their obligations under the National Consumer Credit Protection Act 2009 and ASIC’s responsible lending guidelines.
