Should you refinance your home loan when interest rates are rising?
By RK (Raul Kumar), Aurevia. RK spent 31 years in executive leadership before founding Aurevia. As a mortgage broker, he is legally required to act in your best interests. Credit Representative [NUMBER] is authorised under Australian Credit Licence 389328.
Yes, and for many borrowers it is more important now than when rates were falling. With the RBA cash rate at 4.60% as at October 2026, refinancing is less about chasing a lower rate and more about making sure your current loan structure still works for where you are financially. The right restructure can reduce your repayments, free up cash flow, or shorten your loan, even without a rate cut.
If you are reading this, chances are your repayments have gone up and you are wondering whether you are stuck with them. Maybe you locked in a fixed rate in 2021 or 2022 when rates were under 2%, and now your fixed term has ended or is about to. Maybe you have been on a variable rate the whole way through and every hike has pushed your budget a little tighter. Either way, you are not the only one asking the question, and the answer is rarely as simple as “switch to whoever is cheapest.”
What refinancing actually means
Refinancing is replacing your current home loan with a new one, either with a different lender or sometimes with your existing lender on different terms. You are not starting your loan over from scratch. Your balance, your equity, your repayment history all carry across. What changes is the rate, the structure, or both.
The cost of refinancing typically includes a discharge fee from your current lender (usually $150 to $400), government registration fees, and sometimes a new valuation. Some lenders offer cashback or fee waivers to win your business. Whether the savings outweigh those costs depends on your loan size, your remaining term, and how much better the new terms are. On a $600,000 loan, even a 0.30% rate reduction saves roughly $1,800 a year in interest.
When your fixed rate expires
This is the situation catching the most borrowers right now. Between 2020 and 2022, many Australians locked in fixed rates between 1.89% and 2.50%. Those terms are expiring, and the loan reverts to the lender’s standard variable rate, which in many cases is now above 6.50%.
On a $700,000 loan, moving from a 2.00% fixed rate to a 6.50% variable rate increases monthly repayments by roughly $1,900. That is not a rounding error. It is a genuine shock to the household budget, and it hits all at once.
If your fixed term has recently ended, you are almost certainly not on the best available rate. Lenders price their sharpest rates for new borrowers, not for existing ones rolling onto the back book. Refinancing, or even calling your current lender to negotiate, is worth doing before you absorb months of higher repayments you did not need to pay.
You do not have to move to a new lender
This is a point most refinancing content skips. Your current lender would rather keep you than lose you, and in many cases they will offer a rate reduction, a different product, or a restructured loan if you ask. This is sometimes called a retention offer or a repricing request, and it avoids the cost and paperwork of a full refinance.
It is not always the best outcome. A lender’s retention rate may still be higher than what a competitor offers. But it is worth knowing the option exists before assuming you need to leave.
When we work with refinancing clients, we compare both: what your current lender can offer against what the broader market holds. That way the decision is based on real numbers, not a guess.
What a good refinance review looks at
Rate is the headline, but it is not the whole picture. A proper review should also consider:
Loan structure. Are you on principal and interest or interest only? Does that still match your situation? If your income has changed, or you are closer to retirement, the repayment type matters as much as the rate.
Offset and redraw. Some borrowers refinanced into a low-rate loan years ago that had no offset account. If you now have savings sitting in an everyday account earning 1% while your mortgage charges 6%, the absence of an offset is costing you real money every month.
Loan term. If you refinance a 20-year remaining loan into a new 30-year term, your repayments drop but your total interest cost rises significantly. A good refinance holds or shortens the term where possible.
Cash flow relief vs long-term cost. Sometimes the right move is to extend the term temporarily to ease repayments during a tight stretch, with a plan to increase them again later. That is a legitimate strategy, but only if the trade-off is understood and deliberate.
When refinancing may not be the right move
Refinancing is not always the answer, and it is worth naming the situations where it may not work in your favour.
If you have less than 20% equity, you may trigger lenders mortgage insurance on the new loan, which can cost thousands and wipe out the savings. If your loan balance is relatively small (under $250,000), the dollar savings from a rate reduction may not justify the costs and effort of switching. If you are within a few years of paying off your loan, the remaining interest is modest and the disruption may not be worth it.
There are also fixed-rate break costs. If you are still within a fixed term and want to leave early, the break cost can be substantial, sometimes tens of thousands of dollars depending on market conditions. This needs to be calculated precisely before making a decision.
RK’s take
“Most people only think about refinancing when they see a rate advertised somewhere. But the borrowers who benefit the most are the ones who sit down and look at the full picture, not just the rate, but the structure, the offset, the term, and what their situation actually needs right now. A 0.20% rate saving on a loan that is badly structured is not a real saving. A well-structured loan at a slightly higher rate can be worth more in practice. That is what we work through together.”
Talk to RK about your loan
If your repayments have gone up, your fixed rate has expired, or you simply have not reviewed your loan in the past 12 months, it is worth a conversation. RK compares your current loan against what is available across 40+ lenders and walks you through whether refinancing, restructuring, or staying put is the stronger move for your situation. No obligation, no pressure.
Call RK on 0412 517 237 (7am to 7pm, seven days).
Frequently asked questions
How do I know if refinancing will save me money?
Compare your current interest rate to what is available in the market for your loan size and type. Factor in the costs of switching, which typically include a discharge fee, registration fees, and possibly a new valuation. On a $600,000 loan, a 0.30% rate reduction saves roughly $1,800 per year in interest, so the break-even point on a refinance that costs $1,000 in fees is well under 12 months.
Will I have to pay lenders mortgage insurance again if I refinance?
Only if your loan-to-value ratio is above 80% at the time of the new application. If your property has increased in value or you have paid down enough of the principal to hold at least 20% equity, LMI will not apply. A current valuation at the time of application determines this.
Can I refinance if I am on a fixed rate?
Yes, but you will likely need to pay a break cost to exit the fixed term early. Break costs vary depending on how much of the fixed term is remaining and the difference between your fixed rate and the current wholesale rate. Your lender can provide the exact figure. In some cases the savings from a lower variable rate still outweigh the break cost, but this needs to be calculated before committing.
How long does refinancing take?
Typically four to six weeks from application to settlement, though it can be faster with some lenders. The process involves a new loan application, a property valuation, and the legal transfer of the mortgage from one lender to another. We manage this process for you and keep you informed at each step.
Should I refinance to a fixed or variable rate right now?
That depends on your situation and your outlook. With the RBA cash rate at 4.60% as at October 2026 and further movement uncertain, some borrowers prefer the certainty of a fixed rate, while others prefer the flexibility of variable with an offset account. A split loan, part fixed and part variable, is also an option. We walk you through the trade-offs based on your specific circumstances.
Is there a cost to work with Aurevia on a refinance?
Like most mortgage brokers, we are paid a commission by the lender when your new loan settles. We explain exactly how this works and disclose it to you in writing before you go ahead. If any fee applies to your situation, we tell you upfront. Whatever the commission, we are legally required to act in your best interests.
How often should I review my home loan?
At least once a year, or whenever your circumstances change significantly, such as a change in income, a fixed rate expiring, or a shift in your financial goals. Many borrowers set and forget their home loan for years, which often means paying more than they need to. A review does not commit you to switching. It simply tells you where you stand.
