Interest Rates • Refinance • Mortgage Strategy
Westpac now tips the cash rate could hit 4.85% in 2026. What that means for borrowers.
Westpac has revised its rate track higher again, now forecasting additional 25bp hikes beyond May — including moves in June and August — which would take the peak cash rate to 4.85%. If you’ve got a mortgage (or you’re buying soon), here’s what to watch and what you can do right now.
What Westpac is forecasting (in plain English)
Westpac has added two additional rate hikes to its outlook for 2026 — on top of an already-expected May move — forecasting June and August increases as well. That would mean five consecutive cash rate hikes, taking the peak cash rate to 4.85%, which Westpac describes as the highest level since the global financial crisis. :contentReference[oaicite:1]{index=1}
Why this matters: even if your lender doesn’t move immediately, these forecasts can influence how banks price fixed rates, how strict servicing becomes, and what “good” refinance deals look like week-to-week.
Why the forecast changed: fuel shock + fast pass-through
Westpac’s updated view is tied to a supply shock: ongoing Middle East disruption, including the Strait of Hormuz being “essentially closed for eight weeks” with traffic only slowly recovering, impacting global fuel supply chains. :contentReference[oaicite:2]{index=2}
The key point in their commentary is the speed at which higher fuel and oil-derived prices appear to be flowing into other prices in Australia — and their view that the RBA would respond by tightening more than otherwise needed. :contentReference[oaicite:3]{index=3}
Westpac also noted that the halving of the fuel excise reduces the near-term headline CPI outlook, but they still see a June-quarter inflation peak of 5.4% as “likely”, with trimmed mean inflation expected to peak around 4% later in the year. :contentReference[oaicite:4]{index=4}
What this could mean for your mortgage (and your next move)
If the cash rate path shifts higher, borrowers usually feel it in three places:
- Repayments: variable rates can rise quickly after a move.
- Borrowing power: serviceability buffers can bite harder when rates trend up.
- Refinance pricing: lenders reprice fixed offers and discounts based on expectations, not just today’s rate.
Practical move: a rate check + structure review now can be worth more than waiting for a “perfect time”. If lenders are repricing, being early often gives you more (and cheaper) options.
What Westpac expects next: slower growth, softer jobs, later cuts
Westpac also flagged that a higher cash rate profile would weigh on the economy, expecting slower growth (especially consumption) and a softer labour market, with unemployment peaking around 5%. :contentReference[oaicite:5]{index=5}
Importantly for borrowers planning ahead, they suggest rate cuts could take longer than previously expected, and they “push out” the easing cycle, pencilling in cuts across 2028 (while noting low conviction on exact timing). :contentReference[oaicite:6]{index=6}
Want a quick rate check (and a plan) before the next repricing?
If you’d like, we can review your current rate and structure, then map the best options for your situation — whether that’s staying put, refinancing, or using a split strategy to balance certainty and flexibility.
Note: This is general information only and doesn’t consider your personal objectives, financial situation, or needs.
Source: “Cash rate will hit 4.85% this year: Westpac” (30 March 2026), including commentary attributed to Westpac chief economist Luci Ellis.