RBA hikes cash rate by 25 basis points, big four banks react

As widely expected, the nine-member policy setting committee delivered its third 25‑basis‑point hike of the year, taking the official cash rate to 4.35%.

In its post-meeting statement, the RBA Board acknowledged the impact of the developments in the Middle East on inflation.

"Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly," the statement reads.

The decision was made by the majority, with only one member electing to hold, contrary to expectations of it would be line-ball. 

Following the increases in February and March, all interest rate cuts in 2025 are now effectively wiped out. 

The softer-than-expected trimmed mean in the March quarter wasn’t enough to materially shift the Board’s decision, with NAB noting the Statement on Monetary Policy forecasts predated the conflict in the Middle East. 

Major bank economists warned that broader price pass-through could become more evident in coming months via food and construction costs. 

“The starting point is not a favourable one with core inflation tracking at around 3.5% prior to the shock,” NAB said. 

With inflation levels still inconsistent with a timely return to the RBA’s 2-3% target band, the updated SOMP includes upward revisions to both headline and underlying inflation.

Earlier, CBA and ANZ characterised May as a potential endpoint for the tightening cycle, while NAB forecast the cash rate to remain at this level at least until mid-2027. 

Westpac, by contrast, argued further tightening later this year if pressures persist. 

The big four banks have announced changes to their home loan and deposit products. Here are the latest updates.

CBA

Commonwealth Bank was the first to break the silence, announcing it would pass on the full 25 basis point hike to variable home loan customers, effective 15 May. 

Existing home loan customers can see their new interest rate from 16 May in the CommBank app and NetBank. 

Those who pay principal and interest (P&I) will see their new repayment amount the following day (17 May). 

P&I customers can start paying the higher amount earlier by updating their direct debit through the ‘Change Repayment’ tool in the CBA app or internet banking from 16 May.

“Starting earlier is optional and may help reduce the interest you pay over the life of your loan,” CBA said. 

CBA retail banking group executive Angus Sullivan said the bank recognised many customers were already managing higher living costs, and further rate increases could add to that pressure. 

“Our focus is on supporting customers to stay on top of their finances with practical tools, clear guidance and access to help when it’s needed,” he said.  

Customers needing further support can contact the bank at any time. 

“By having proactive conversations early and often, we can ensure we are providing the right support and solutions for our customers when they need it,” Mr Sullivan said.

CBA is still reviewing the interest rates of its savings account products. 

Check this page for the latest announcements. 

NAB

NAB is also increasing variable home loan rates by 0.25% p.a. starting 15 May. 

In its announcement, NAB personal banking group executive Ana Marinkovic acknowledged the impact of cost‑of‑living pressures, including higher interest rates.  

She said NAB was focused on helping customers understand what the change meant for them.

“While interest rates set the broader economic backdrop, what matters most for customers is how their repayments change and knowing there are options and support available if they need it,” Ms Marinkovic said. 

Customers concerned about their repayments are encouraged to contact NAB early. 

“If you’re feeling uncertain, the most important step is to reach out sooner rather than later so we can talk through what options might be right for your circumstances.” 

ANZ

ANZ joined its big four peers in passing on the 25-basis-point hike in full to its mortgage borrowers. 

Starting 15 May, ANZ variable home loan rates will increase by 0.25% p.a.

ANZ is reviewing other rates. 

A 0.25% p.a. increase will add roughly $80 to the monthly repayment of a $500k variable home loan paying principal and interest. 

“We recognise that many Australian households are feeling pressure from the cost of living amid current global uncertainty,” ANZ Australia retail group executive Pedro Rodeia said. 

“If you are concerned about your finances, we encourage you to speak with us early so we can help,” he added.  

“Our team is ready to provide guidance, practical tools and tailored support to help you manage your finances and plan with confidence.” 

Westpac

Westpac will also increase variable home loan rates for new and existing customers by 0.25% p.a., effective 15 May.

Westpac consumer chief executive Carolyn McCann said the conflict in the Middle East is contributing to global uncertainty and adding to inflationary pressures.

“Right now our focus is on helping customers through the current economic environment,” she said. 

“We encourage customers who are feeling stretched to reach out early. We have a range of support options available and our teams are ready to help.” 

Westpac will also lift deposit rates, passing on the hike in full. 

The Westpac Life total variable rate, including bonus interest, will rise by 0.25% p.a. to 5.00% p.a. 

The standard variable rate on the Westpac eSaver will also increase for all customers, with the total variable rate for new online customers rising to 5.25% p.a. including a five‑month introductory bonus. 

All these changes will be effective from 15 May. 

“We’ve also increased deposit rates which will provide some relief for savers who are navigating higher living costs,” Ms McCann said.

Follow Savings.com.au’s live blog on the May cash rate decision