Mortgage Stress Mounts as Banks Eye More Rate Hikes

Broker Notes
Written By Joshua Weiler

Week of 11 April 2026

The RBA's cash rate is now sitting at 4.10% after two back-to-back hikes, and Australia's major banks are already forecasting more pain ahead. Westpac is tipping three additional rises by August – which would push the cash rate to 4.85% and add roughly $457 a month to a $600,000 mortgage. For anyone with a home loan right now, the picture is shifting fast.

How Australia's Big Four Banks Are Responding to the Rate Hikes

All four major banks – Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), ANZ, and Westpac – confirmed they would pass on the full 0.25% March increase, but they did it at different speeds. CBA, NAB, and ANZ moved on 27 March, 10 days after the RBA decision. Macquarie Bank delayed its implementation by 17 days, offering customers more time to plan. The lowest available variable rates among the major four are now sitting at or above 6%.

Outside the big four, non-banks were slower to confirm updated rates. That gap between lender speeds is worth noting. Brokers at Mortgages Plus and Mortgage Choice Parramatta told Broker Daily they spent the week repricing client loans to ensure borrowers were still on competitive rates, because staying loyal to the wrong lender right now can cost thousands.

The next RBA decision falls on 4-5 May 2026. Markets are pricing in another potential increase. The February-March double hike reversed two of the three cuts the RBA delivered throughout 2025 – when the cash rate briefly fell to 3.60% – and analysts say there is no clear path back to lower rates in the near term.

Westpac Forecasts Three More Rate Hikes. What That Means for Your Repayments

Westpac is the most aggressive of the major banks in its forecasting, predicting three more 25-basis-point hikes in May, June, and August 2026. If that plays out, the cash rate would reach 4.85% – higher than the peak of the previous tightening cycle in November 2023.

What does that mean in dollar terms? On a $600,000 mortgage over 25 years, Canstar modelling suggests those three additional hikes would add approximately $457 per month to repayments. On a $736,000 loan – closer to the national average – a single 25-basis-point move adds around $116 a month.

For context: the average Australian mortgage has grown significantly over the past three years as property prices climbed. Borrowers who stretched at the top of the market are now facing repayment pressures that were not part of their original planning. Most mortgage holders who spoke to brokers said they are staying on variable rates and managing, but confidence is thinning.

Moody's Sounds the Alarm on Australian Mortgage Affordability

A Moody's Ratings report released this week delivered one of the starkest assessments of Australia's housing affordability in years. As of March 2026, Moody's affordability measure – which tracks the share of average after-tax household income needed to service a new mortgage – sat at 29.6%. That is up from 28.6% just three months earlier.

Sydney is the clear outlier. At 40.4%, nearly half of average household after-tax income is now required to service a typical new home loan in the city. Brisbane sits at 31.7%, reflecting the rapid price growth that city has experienced over the past two years.

Roy Morgan's mortgage stress data reinforces the picture. An estimated 26.6% of Australian mortgage holders – around 1.4 million people – are currently considered "at risk" of mortgage stress. Roy Morgan CEO Michele Levine has warned that figure could rise to 30.3%, or approximately 1.6 million borrowers, if the RBA lifts rates again in May. That would be the highest level of mortgage stress seen since at least 2023.

The combination of back-to-back rate hikes, elevated fuel costs driven by Middle East conflict, and still-high house prices is squeezing borrowers from multiple directions. The RBA has cited inflation at 3.8% annually – well above its 2-3% target – as the driver of its current stance.

Property Investors on Edge as Budget Tax Reform Looms

With the federal budget scheduled for 12 May 2026, Treasurer Jim Chalmers has confirmed Treasury is actively modelling two significant changes to property investment settings. The first is a cap on negative gearing – which currently allows investors to offset rental losses against their regular income without limit – reduced to a maximum of two investment properties per person. The second is a reduction to the capital gains tax (CGT) discount from 50% to 33% for assets held longer than 12 months.

A survey conducted by Money.com.au found that 61% of property investors said they would pull back from the market or sell existing holdings if these reforms proceed. That is a striking number. South Australia and Queensland investors showed the highest sensitivity to CGT changes, while Western Australian investors were most reactive to the negative gearing cap.

Industry bodies including the Housing Industry Association commissioned modelling showing the combined reforms could reduce new housing starts by approximately 46,000 dwellings over five years. That is a real tension in a market where national rental vacancy rates already sit at just 1.1%. Nothing has been legislated yet – these remain proposals. But the window for investors to act under the current rules is narrowing fast.

Queensland Opens More Spots in Its Shared Equity Scheme

On 10 April, Queensland's government announced 500 additional places in round two of its Boost to Buy shared equity program. Shared equity means the government co-purchases a share of the property with you, reducing the size of the mortgage you need – and therefore the deposit required.

This is meaningful news for first home buyers in Queensland who have been priced out or struggling to save a full deposit in a rising rate environment. If you are in Queensland and have been eyeing this program, the second round is now open for applications.

AUSTRAC Puts Lenders on Notice Over Mortgage Fraud

Australia's financial intelligence agency AUSTRAC has widened its investigation into suspected large-scale mortgage fraud. AUSTRAC CEO Brendan Thomas told The Adviser this week that the regulator is working with major banks, law enforcement, and other agencies to map the extent of increasingly complex loan scams. The investigation follows allegations that a sophisticated syndicate may have duped the Commonwealth Bank of Australia.

AUSTRAC has issued fresh guidance urging all lenders to lift verification standards and strengthen anti-money-laundering checks. For borrowers, the practical implication is that loan applications and income verification are likely to face closer scrutiny in the coming months. This is part of a broader tightening across the credit assessment process.

Key Takeaways

  • The RBA's cash rate is at 4.10% following two consecutive hikes, with the next decision on 4-5 May 2026.

  • Westpac is forecasting three more hikes by August, which could add approximately $457 per month to repayments on a $600,000 mortgage.

  • Moody's reports that new home loan repayments now consume 29.6% of average after-tax income nationally, and 40.4% in Sydney – affordability is deteriorating.

  • Roy Morgan estimates up to 1.6 million mortgage holders could be classified as "at risk" of mortgage stress if the May rate hike proceeds.

  • Treasury is modelling a two-property cap on negative gearing and a CGT discount cut from 50% to 33%, with a decision expected in the 12 May federal budget.

  • Queensland has opened 500 new places in its Boost to Buy shared equity program, offering a pathway for first home buyers struggling with rising costs.

Your home loan journey doesn't have to be overwhelming. Whether you're ready to take the next step or just exploring your options, book a chat with the JRW Finance team at jrwfinance.com.au/meet – or find us on TikTok, Instagram, and Facebook.

References

Joshua Weiler
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