Why Australian Banks Are Raising Fixed Rates Before the RBA: What Borrowers Should Do Now

Banks Aren’t Waiting for the RBA

Something unusual is happening in Australia’s mortgage market in March 2026. Before the Reserve Bank of Australia has even made its next interest rate decision (scheduled for 17 March), the banks have already started moving.

ANZ made headlines on 12 March by hiking its fixed mortgage rates by 0.25 percentage points across multiple terms. But ANZ wasn’t acting alone. Canstar data shows that in just two weeks, 20 lenders have increased close to 400 fixed-rate products. Meanwhile, 41 banks have hiked 184 term deposit rates.

As Canstar’s data insights director Sally Tindall put it, these are “two very loud canaries in the coal mine.”

For borrowers, the message is clear: the banks believe rates are going up, and they’re not waiting for the RBA to confirm it.

How Bank Rate-Setting Actually Works

Variable Rates Follow the RBA (Mostly)

Most Australians understand the basics: the RBA sets the cash rate, and banks adjust their variable mortgage rates accordingly. When the RBA hiked by 0.25% to 3.85% in February 2026, the big four banks all passed on the full increase within days.

But the relationship isn’t quite as simple as it appears. Banks have some discretion over their variable rates. They can absorb part of a hike, pass on more than the hike, or adjust rates independently of the RBA (though this is rare and politically sensitive).

The average variable rate for owner-occupiers paying principal and interest currently sits at approximately 6.17%, according to Canstar. That’s roughly 2.32% above the cash rate, reflecting the banks’ funding costs, credit risk margin, and profit.

Fixed Rates Follow the Markets

Fixed rates work differently. When a bank offers you a 2-year or 3-year fixed rate, it’s essentially making a bet on where interest rates will be over that period. To manage that risk, banks hedge their fixed-rate lending using wholesale swap rates, which are traded in financial markets.

Here’s the key point: swap rates reflect where the market expects the cash rate to go, not where it is today. If traders expect the RBA to hike twice more in 2026, swap rates price that in immediately, and banks adjust their fixed rates accordingly.

This is why fixed rates can move weeks or even months before the RBA acts. It’s not the banks being greedy (at least, not primarily). It’s the banks repricing to reflect their actual cost of funding fixed-rate loans.

The Swap Rate Signal

The 3-year swap rate is one of the most watched indicators in Australian mortgage markets. When it rises sharply, fixed mortgage rates follow. In the weeks since the Iran conflict began, swap rates have moved higher as markets priced in:

• A March 2026 hike to 4.10%
• A May 2026 hike to 4.35%
• The possibility of rates staying elevated for longer if inflation proves sticky

Source: Canstar, ASX, RBA. Figures are indicative.

Notice that swap rates have moved more than the actual cash rate. That’s because they’re forward-looking, pricing in hikes that haven’t happened yet. And fixed mortgage rates have followed.

What the Big Four Are Forecasting

The consensus among Australia’s major banks has shifted dramatically in March 2026. All four now expect the RBA to hike at both the March and May meetings.

Source: Bloomberg, bank research notes (March 2026)

This unanimity is significant. Just a month ago, several of these banks were forecasting a hold in March and a single hike in May. The Iran conflict and its impact on oil prices, inflation expectations, and the RBA’s increasingly hawkish rhetoric have forced a rapid rethink.

UBS and Deutsche Bank have made similar calls, suggesting this isn’t just a domestic view but one shared by international institutions watching Australia’s economy.

Term Deposits: The Other Canary

While fixed mortgage rates rising gets most of the attention, the simultaneous increase in term deposit rates is equally telling. When 41 banks hike 184 term deposit rates in two weeks, it signals that banks are competing harder for deposits, which they do when they expect to need more funding for lending or when they expect higher rates ahead.

For savers, this is actually good news in the short term. Term deposit rates have climbed meaningfully:

Source: Canstar, indicative averages across major and second-tier banks.

If you’re looking to park cash for a fixed period, locking in a 1-year term deposit at current rates isn’t a bad move, particularly if you believe rates will eventually come back down once the current inflationary pulse passes.

What This Means for Borrowers

If You’re on a Variable Rate

You’re directly exposed to whatever the RBA does next. If the March hike goes ahead as expected, your lender will almost certainly pass it on. On a $600,000 loan with 25 years remaining, that’s approximately an extra $91 per month. If the May hike follows, it’s another $91 on top.

Over a year, those two hikes would add roughly $2,184 to your annual mortgage costs on a $600,000 loan, or $3,636 on a $1,000,000 loan.

What to do:

1. Check your rate against the market. If you’re paying more than 6.00% on a variable rate, you may be able to switch to a cheaper lender. Over 40 lenders still offer at least one variable rate under 5.50%.
2. Call your bank. Many lenders will offer a discount if you threaten to leave. A 0.20% discount on a $600,000 loan saves roughly $75 per month, or $900 per year.
3. Stress-test your budget. Model what your repayments would look like if rates hit 4.35% (the expected peak). If the numbers are tight, consider your options now rather than waiting.

If You’re on a Fixed Rate

If your fixed rate hasn’t expired yet, you’re insulated from the current volatility. However, you need to plan for what happens when your fixed term ends, because you’ll roll onto a variable rate that could be significantly higher than what you locked in.

What to do:

1. Know your expiry date. If your fixed term expires in 2026, start comparing options now.
2. Build a buffer. Use the remaining months of your lower fixed rate to save the difference between your current repayments and what they’d be at the current variable rate.
3. Talk to a broker early. Refinancing takes time (typically 4 to 8 weeks), so don’t leave it until your fixed rate expires.

If You’re Considering Fixing

The question on many borrowers’ minds is: should I fix now before rates go even higher?

It’s a genuine dilemma. Fixed rates have already risen to reflect expected RBA hikes, so you’re paying a premium for certainty. But if the RBA ends up hiking more than expected (or keeping rates higher for longer), fixing could still save you money.

Here’s a framework for thinking about it:

The Split Loan Option

For many borrowers, the answer isn’t all-or-nothing. Splitting your loan (fixing a portion while keeping the rest variable) gives you partial certainty while maintaining some flexibility.

For example, on a $600,000 loan:

• Fix $400,000 at a 2-year fixed rate for payment certainty on the bulk of the loan
• Keep $200,000 variable to maintain access to offset account, extra repayments, and redraw

This approach means you’re partially protected if rates rise further, but you’re not completely locked in if rates fall or if you need to make changes to your loan.

What to Watch for in Coming Weeks

The March 17 RBA Decision

This is the big one. If the RBA hikes to 4.10% as expected, variable rates will rise within days. If it holds, there could be a brief reprieve, but the May meeting would then become even more heavily anticipated.

Bank Pricing Moves

Watch for further fixed-rate increases in the week after the RBA decision. Banks that haven’t yet adjusted their fixed rates will likely do so once the hike is confirmed. Conversely, if the RBA surprises with a hold, some lenders might pause their fixed rate increases (though they’re unlikely to reverse them).

Refinancing Volumes

APRA data on home loan commitments (released monthly with a lag) will show whether borrowers are refinancing in response to rate rises. High refinancing volumes signal that competition is keeping a lid on rates at the margin, which benefits all borrowers.

The April CPI Release

The Q1 2026 CPI data, due 29 April, will be the next major piece of the puzzle. If it shows inflation accelerating (as many economists expect, given the oil price impact), the case for the May hike becomes almost irrefutable. If inflation somehow moderates, the RBA might have room to pause.

How a Mortgage Broker Can Help

In a rising rate environment with rapidly shifting bank pricing, a mortgage broker’s value increases significantly. Here’s why:

• Access to the full market: Brokers compare rates across 30 to 40+ lenders, including smaller banks and credit unions that often offer more competitive rates than the big four.
• Speed: When rates are moving quickly, the ability to lock in a rate fast matters. Brokers can identify and submit applications faster than borrowers shopping around individually.
• Scenario modelling: A good broker will model your repayments under different rate scenarios (hold, one more hike, two more hikes) and help you decide whether fixing, splitting, or staying variable makes the most sense.
• Negotiation: Brokers know what discounts lenders are currently offering and can often secure better rates than walk-in customers.

The broker’s service is typically free to the borrower (they’re paid by the lender), so there’s little downside to getting professional advice in the current environment.

The Bigger Picture: Where Are Rates Heading?

Beyond the immediate March and May decisions, the longer-term rate outlook depends heavily on how the Iran conflict and its inflation impact play out.

Scenario 1: Conflict de-escalates, oil falls back to US$70 to $80 In this case, the inflationary impulse fades. The RBA may hike in March and May but could start cutting again in late 2026 or early 2027. Fixed rates would eventually fall, and borrowers who fixed at current levels might end up paying more than they needed to.

Scenario 2: Conflict continues, oil stays above US$100 Inflation stays elevated. The RBA keeps rates at 4.35% or higher through 2026 and possibly into 2027. Variable rate borrowers face prolonged pain. Those who fixed in March 2026 look smart.

Scenario 3: Conflict escalates further, oil spikes above US$130 A severe stagflationary shock. The RBA faces impossible choices between fighting inflation and avoiding recession. Rates could go even higher than 4.35%, or the RBA might be forced to pause and accept above-target inflation to avoid an economic collapse. This is the tail risk scenario that nobody wants.

Most economists currently see Scenario 2 as the most likely, with Scenario 1 as the best case and Scenario 3 as a low-probability but high-impact risk.

Practical Steps to Take This Week

1. Check your current rate against the market using comparison sites like Canstar, RateCity, or Finder.
2. Calculate the impact of one and two more 0.25% hikes on your repayments.
3. Review your budget and identify where you’d find the extra money if rates rise.
4. Call your lender or broker to discuss your options before the March decision.
5. If you’re refinancing, get your application in now. Processing times can blow out during periods of high demand.
6. If you’re buying, factor the higher rate environment into your borrowing capacity. What you could borrow six months ago may be more than what you can comfortably service today.

The Bottom Line

Banks raising fixed rates before the RBA acts isn’t a conspiracy. It’s how financial markets work. But it does mean the window for locking in lower fixed rates is closing.

Whether you should fix, stay variable, or split your loan depends on your financial situation, risk tolerance, and view on where rates are headed. There’s no single right answer, but there’s definitely a wrong one: doing nothing and hoping for the best.

If you’re unsure about the best mortgage strategy for your situation, talking to a qualified mortgage broker can help you weigh up the options with real numbers.

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