After the Reserve Bank increased the cash rate to 3.85% last month, attention has turned to whether another rise is likely next week. The possibility of another hike is under close review by economists and borrowers alike.

The RBA’s upcoming decision follows a recent trend reversal in interest rates. While the cash rate was cut several times last year, giving borrowers some relief, the momentum has shifted, and forecasters are now closely examining the likelihood of further increases.

Current data and commentary from major banks indicate that a further rate increase is considered likely at the upcoming RBA board meeting.

Underlying economic factors, including inflation pressures, are influencing this outlook. Preparing your budget for another potential cash rate rise may be a prudent step for households. Here is what you need to know before Tuesday afternoon.

What the Big Four are Predicting

When the big four banks all agree on what the RBA is going to do, it usually pays to listen. Right now, the consensus is tough reading for homeowners, with all four major bank economists forecasting that the RBA will move forward with another rate increase at the upcoming meeting.

Economists at CBA, NAB, Westpac and ANZ are tipping the RBA to raise the cash rate not just in March, but also in May.

Bank	March Cash Rate Prediction	Next Expected Move
CBA	0.25% Hike	Another 0.25% hike in May
NAB	0.25% Hike	Another 0.25% hike in May
Westpac	0.25% Hike	Another 0.25% hike in May
ANZ	0.25% Hike	Another 0.25% hike in May

Financial markets are currently pricing in a 65% chance of a hike next week. Why the sudden rush to raise rates? It comes down to a messy mix of a hot local economy and global chaos.

The Economy is Running Too Hot

Recent economic data confirms continued expansion, with Australia’s economy growing by 2.7% over the last calendar year. Household spending, government investment and business activity have all recovered at a strong pace, outstripping initial expectations. When demand in the economy exceeds the available supply, it adds upward pressure on prices, a key factor contributing to ongoing inflation.

Recent data shows the economy grew by 2.7% over the last calendar year. Household spending, government spending, and business investment all bounced back much faster than anyone anticipated.

Here is the problem. When demand outstrips supply, prices go up. That is the textbook definition of inflation.

The RBA wants inflation sitting nicely between 2% and 3%. Right now, headline inflation is stuck at 3.8%. RBA Governor Michele Bullock recently warned that they will actively look at moving more quickly if inflation doesn’t cool down. They don’t want to leave rates unchanged only to realize later that they need to hike even harder.

The Middle East Oil Shock

In addition to domestic economic conditions, international developments are also influencing the outlook for interest rates.

Escalating conflict in the Middle East has sent global oil prices surging above $100 a barrel. You are probably already feeling this at the petrol pump. When fuel costs jump, the cost of transporting groceries, building materials, and everyday goods jumps right along with it.

This presents a massive dilemma for the RBA.

On one hand, a spike in oil prices directly feeds into higher inflation. That puts pressure on the RBA to raise interest rates to keep expectations under control.

On the other hand, paying an extra 40 cents a litre for fuel acts like a new tax on your household. It drains your disposable income, which naturally slows down your spending. Hiking interest rates at the exact same time people are being squeezed at the bowser is a risky move that could push the economy into a recession.

It is a genuine debate. But given the RBA’s recent track record, they view inflation as the ultimate enemy that must be defeated, even if it causes short-term pain for mortgage holders.

Property Prices Keep Climbing

Higher interest rates are generally expected to put downward pressure on property prices by reducing borrowing capacity; however, recent data shows a varied response across Australian markets.

Across the 12 months to February, national home values increased 9.9%, according to Cotality’s latest data. This was “the fastest 12-month pace of growth since June 2022”, read Cotality’s Monthly Housing Chart Pack.

Look closer, and the story changes depending on where you live.

Sydney and Melbourne are easing. The sheer cost of housing in these cities means buyers are maxed out. When interest rates rise, borrowing capacity shrinks, and buyers in these expensive capitals simply can’t stretch any further.

But the mid-sized capitals are completely ignoring the RBA. Perth property values surged 2.3% last month alone. Brisbane jumped 1.6%, and Adelaide rose 1.3%.

Why? Largely because there simply aren’t enough houses to go around.

In Perth, the number of properties listed for sale is almost half of what it usually is. When you combine strong population growth with a severe lack of new construction, buyers are forced to compete aggressively. We are even seeing a rush of buyers trying to snap up homes right now, specifically to get in before the RBA hikes rates again.

What You Should Do Right Now

If the RBA increases the cash rate by another 0.25% next week, borrowers with variable-rate mortgages will see their monthly repayments rise. Being aware of the potential financial impact and reviewing your current interest rate before the decision is announced can help you prepare for any upcoming changes. It’s time to get on the front foot.

At Yellow Brick Road Home Loans, we’re not just about numbers and rates. We’re focused on understanding your story and helping you take the next step toward your goals.

Whether you’re buying your first home, upgrading for a growing family, or exploring refinancing options, we’ll be with you every step of the way.

With access to over 35+ lenders and solutions tailored just for you, we’re here to make the process as smooth and stress-free as possible.

Reach out today, and we’ll help you get started on building your future.