The RBA Isn't Sure Rates Are High Enough — Here's What That Means for Your Mortgage
The Reserve Bank's own deputy governor admitted this week that the board is not confident the cash rate is at the "right level," even with rates already at 4.10% and two consecutive hikes under its belt. With March unemployment holding at 4.3% and Westpac forecasting the cash rate could hit 4.85% by August, Australia's mortgage market is navigating its most uncertain environment since 2022 — and non-bank lenders are quietly picking up the borrowers that the major banks can no longer reach.
RBA Deputy Governor Signals Rates May Not Be High Enough Yet
On 16 April, RBA Deputy Governor Andrew Hauser made a striking admission during a fireside chat with the Money Marketeers of New York University. He said the board is not yet fully convinced that rates are restrictive enough to bring inflation back to target, particularly as an ongoing energy-price shock threatens to push consumer prices higher again. It is an unusually candid acknowledgement from a central bank that has already hiked twice in 2026.
The RBA raised the cash rate to 3.85% in February and then again to 4.10% in March, reversing all three cuts delivered during 2025. Hauser's comments suggest the board is watching the energy and fuel pass-through closely, and that a third consecutive hike at the May meeting cannot be ruled out. The next RBA board meeting is scheduled for 5 May.
For anyone with a variable rate mortgage, this is uncomfortable reading. Every 0.25% move adds roughly $80 per month to a $600,000 loan. A further hike in May would bring the cumulative 2026 increase to 0.75%, unwinding all of last year's relief in full.
What does it mean when the RBA says it's "not convinced rates are tight enough"?
It means the board believes current interest rates may not be slowing down borrowing and spending quickly enough to bring inflation back to its 2–3% target band. In plain terms: more hikes are possible. The RBA is telling the market not to expect a pause any time soon.
RBA cuts to 4.10% — first reduction since 2020. Mortgage holders get first relief in three years.
Rate falls to 3.85%. Banks pass on cut in full. Refinancing activity surges.
Third consecutive cut brings cash rate to 3.60%. Borrowing power rises significantly.
Inflation re-accelerates. RBA raises rate to 3.85%, catching many borrowers off guard.
Second straight hike takes cash rate to 4.10%. Energy price shock cited. Hauser flags further tightening possible.
RBA meets 5 May. Westpac and HSBC forecast a further 0.25% rise to 4.35%.
Jobs Data Gives the RBA Room to Hike Again in May
Australia's March unemployment rate came in steady at 4.3%, and on the surface that looks like good news. The major banks are reading it differently. According to analysis published in The Adviser on 17 April, NAB, CBA, Westpac, and ANZ all noted that stable employment provides the RBA with greater flexibility to continue tightening. When the labour market is not breaking down, the central bank faces less pressure to pause.
Westpac Group chief economist Luci Ellis has gone further than any of her peers. Ellis forecasts three additional 0.25% hikes across 2026, which would take the cash rate to 4.85% by August. That would fully reverse the 2025 cuts and then some, pushing rates to territory not seen since the global financial crisis. ANZ takes a more conservative view, expecting the cash rate to peak at 4.35% after a May move.
The divergence between Westpac and ANZ matters for anyone trying to decide whether to fix their rate. Locking in a two-year fixed rate today insulates against Westpac's scenario while potentially limiting upside if ANZ's more modest view plays out. Neither bank is predicting rate cuts before 2028.
Banks Are Saying No More Often. Non-Bank Lenders Are Stepping In.
A revealing story from The Adviser on 15 April put numbers to something brokers across Australia have been experiencing on the ground. Rising interest rates combined with APRA's 3 percentage point serviceability buffer mean many borrowers who could afford their repayments a year ago can no longer pass a bank's assessment. Non-bank lenders, which are not bound by the same APRA restrictions, are absorbing that overflow.
One brokerage tracking its own data found non-bank loans rising from 8% of its total volume in FY25 to 13% so far in FY26. The same broker said that figure could reach 20% if current serviceability constraints persist. Non-bank rates are typically higher than bank rates, so this is not a cost-free option. But for a borrower who has been declined or who cannot demonstrate income through a standard payslip, a non-bank loan at a higher rate is often better than no loan at all.
The non-bank sector is regulated and legitimate. Lenders like Pepper Money, Rate Money, and others operate under Australian Credit Licences and are funded through capital markets rather than deposits. The key difference is flexibility: alternative income documentation, high LVR options, and loan structures that accommodate self-employed borrowers, complex trust structures, or borrowers rebuilding credit history.
Is it safe to use a non-bank lender for a home loan in Australia?
Yes. Non-bank lenders operating in Australia are regulated by ASIC and must hold an Australian Credit Licence. They cannot take deposits, but they can and do write mortgages. They are not covered by the government's deposit guarantee, but that applies to savings accounts, not loans. The main trade-off is that rates are often slightly higher than major bank rates. A broker can help you compare options and identify whether a non-bank product genuinely suits your situation.
Coalition Pledges to Lock Non-Citizens Out of the 5% Deposit Scheme
Opposition leader Angus Taylor used a speech to the Menzies Research Centre on 14 April to announce that a Coalition government would bar all non-citizens from accessing the government's 5% deposit scheme. Under the current Labor framework, the First Home Guarantee is available to Australian citizens and permanent residents. Taylor's proposal would strip access for permanent residents, restricting the program to citizens only.
The First Home Guarantee allows eligible buyers to purchase property with as little as a 5% deposit, with the government guaranteeing the remainder of what would normally be a 20% deposit requirement. It eliminates the need for Lenders Mortgage Insurance, which can add thousands of dollars to the upfront cost of a property purchase. Removing permanent residents from this scheme would affect a significant portion of current applicants, particularly in Sydney and Melbourne where skilled migrants represent a meaningful share of first home buyers.
The federal election is expected later in 2026. Whether this policy becomes law depends on the outcome. For permanent residents currently eligible for the scheme, the window to act under existing rules may be limited. If you are a permanent resident considering using the First Home Guarantee, it is worth factoring in the current political environment when timing your application.
Property Market Softens but Supply Crisis Keeps Prices Elevated
Cotality's April 2026 Monthly Housing Chart Pack shows national annual home value growth running at 9.9%, the fastest pace since June 2022. That headline sounds strong. The detail is more complicated. Sydney auction clearance rates have dropped to around 52.7% in some weeks, the lowest reading since July 2022, and ANZ Research revised its full-year Sydney price forecast to negative 0.7%, citing higher interest rates and a sharp fall in consumer confidence tied to geopolitical instability.
Supply is the dominant factor preventing a sharper correction. New listings over the four weeks to 5 April 2026 came in at 36,712, down 3.3% on the same period last year. Total advertised stock nationally sits at approximately 122,500 dwellings, which is 15.1% below the five-year average. When sellers pull back at the same time as buyers hesitate, transaction volumes fall but prices do not collapse. The national median vendor discount is sitting near record lows at 3.1%, meaning sellers are still achieving close to their asking price in most markets.
Perth and Adelaide remain the tightest markets. Perth's median days on market is 9 days, an almost extreme seller's market condition. Brisbane's growth is moderating. Melbourne is stabilising after a difficult few years. The rental market offers little relief for those waiting to buy: the national vacancy rate sits at just 1.6%, with gross rental yields rising to 3.57% nationally. Darwin leads at 6.0% yield; Sydney remains the lowest at 3.1%.
| Market | Auction Clr. Rate | Days on Market | Rental Yield |
|---|---|---|---|
| Sydney | ~52.7% | Rising | 3.1% |
| Melbourne | ~58.3% | Stable | ~3.5% |
| Perth | N/A | 9 days | ~4.5% |
| Darwin | N/A | Below avg | 6.0% |
| National | ~57.8% | 30 days | 3.57% |
Key Takeaways
- The RBA's deputy governor Andrew Hauser said this week the board is not convinced the 4.10% cash rate is tight enough, keeping the door open for a May hike on 5 May 2026.
- Westpac forecasts the cash rate reaching 4.85% by August 2026, while ANZ expects a more modest peak of 4.35% in May — and neither bank expects cuts before 2028.
- Stable March unemployment at 4.3% removes a key reason for the RBA to pause, giving the board more confidence to continue tightening.
- Non-bank lending is rising fast, with one brokerage reporting its non-bank share growing from 8% to 13% of volume in FY26, driven by borrowers the major banks can no longer service under current APRA buffers.
- The Coalition has pledged to restrict the 5% First Home Guarantee to citizens only if elected, which would exclude permanent residents who currently qualify for the scheme.
- Australia's property market shows split conditions: national annual growth of 9.9% is real, but Sydney clearance rates are at their lowest since July 2022, supply is 15.1% below the five-year average, and ANZ has revised Sydney's full-year price forecast to negative 0.7%.
Your home loan shouldn't just survive this rate environment, it should be working as hard as possible for you. Whether you're weighing up fixing versus variable, exploring non-bank options, or wondering how the 5% deposit scheme applies to your situation, book a conversation with the JRW Finance team at jrwfinance.com.au/meet. Find us on TikTok, Instagram, and Facebook for more.
References
- Hauser concedes RBA unsure if cash rate at 'right level' – The Adviser – 16 April 2026 – https://www.theadviser.com.au/borrower/48316-hauser-concedes-rba-unsure-if-cash-rate-at-right-level
- Stable jobless figures give RBA headroom to hike, say majors – The Adviser – 17 April 2026 – https://www.theadviser.com.au/lender/48322-stable-jobless-figures-give-rba-headroom-to-hike-say-majors
- Brokers turn to non-banks amid serviceability squeeze – The Adviser – 15 April 2026 – https://www.theadviser.com.au/broker/48313-non-bank-mortgages-creep-higher-as-serviceability-squeeze-bites
- Coalition to prevent non-citizens from accessing 5% deposit scheme – The Adviser – 16 April 2026 – https://www.theadviser.com.au/borrower/48320-coalition-to-prevent-non-citizens-from-accessing-5-deposit-scheme
- Monthly Housing Chart Pack – April 2026 – Cotality – April 2026 – https://www.cotality.com/au/insights/articles/monthly-housing-chart-pack-april-2026
- Everything you need to know about the state of Australia's property markets in 20 charts – April 2026 – PropertyUpdate.com.au – 12 April 2026 – https://propertyupdate.com.au/everything-you-need-to-know-about-the-state-of-australias-property-markets-in-charts/
- Latest Property Price Forecasts Revealed – PropertyUpdate.com.au – 14 April 2026 – https://propertyupdate.com.au/australian-property-market-predictions/
- Fixed vs variable: What should borrowers do as they brace for more hikes? – SBS News – 18 April 2026 – https://www.sbs.com.au/news/article/mortgage-borrowers-to-review-loan-ahead-cash-rate-hikes/wpwv2lnx1
