Five rate hike shock: Borrowing costs to hit GFC highs

Sophie Foster

Updated 4 May 2026, 11:39am

First published 4 May 2026, 11:28am

RBA Governor Michele Bullock is presiding over the monetary policy meeting which delivers its May verdict on the cash rate Tuesday. Source: Getty

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Aussies face a shocking five rate hikes this year, with markets now tipping GFC-high mortgage costs and smashed buying power.

PropTrack senior economist Eleanor Creagh said there were clear warning signs with financial markets already pricing in a steep rise in rates.

“As of market close (last week) the December cash rate futures implied yield curve suggests 4.75 per cent,” she told The Courier-Mail.

That figure has since climbed higher, sitting at around 4.78 per cent as of Monday – a level not seen since November 2008 during the global financial crisis.

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The last time rates were higher than 4.75 per cent was during the GFC. Source: ASX

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With a rise to 4.35 per cent widely expected on Tuesday, that would mean a further 40 basis points or so predicted by the end of the year.

Ms Creagh said the market had shifted significantly, with home price growth in some areas already falling.

“We’ve already seen two back-to-back rate rises. Another rate rise in May will be 75 basis points of tightening,” she said.

“If there’s further rate rises in the second half of this year, that could be a 10 per cent reduction in borrowing capacity.”

She said while a five-hike scenario was not guaranteed, it remained firmly possible.

“I mean, potentially it could,” she said. “That could be more of a worst-case scenario, but it’s not out of the realms of possibility.”

The warning comes as buyers face a worsening affordability squeeze – with borrowing limits shrinking even as home prices hold firm.

“Prices are not falling. So the net effect is that potential buyers are worse off,” she said.

PropTrack senior economist Eleanor Creagh

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The market expects a May rate hike that would take the cash rate target to 4.35 per cent. Source: ASX

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Ms Creagh said the market was already showing signs of a turning point.

“I’d say that what we’re seeing is suggestive of a turning point.”

Higher rates are also beginning to weigh on buyer demand and confidence.

“We are seeing that home buying demand is weaker with interest rates rising … and high levels of global and domestic uncertainty weighing on confidence,” she said.

While buyers may benefit from less competition, the overall picture remains challenging.

“Less competition, lower clearance rates … buyers regaining negotiating power,” she said.

“But the net effect … is buyers are worse off.”

Ms Creagh said the market was now entering a new phase.

“I think we’re going to continue to see an adjustment … slower growth and further price declines are probably likely.”