In the race to refinance, when is the right time for you?

As interest rates trend down and property prices heat up, many Australian homeowners are starting to ask the big question: is now the right time to refinance?

Let’s look at some key considerations when considering refinancing.

A changing lending environment

Over the past few years, refinancing activity has surged as borrowers looked to outpace the Reserve Bank of Australia’s aggressive interest rate hikes, with the value of external refinancing hitting over $19 billion in mid-2023, a record high at the time.ⁱ

However, rates are now easing amid expectations of a stabilising economy and the possibility of future cash rate cuts. This downward movement has started to open new windows of opportunity. As banks compete for business and seek to retain existing borrowers, competitive rates and refinancing incentives are once again being offered to eligible customers. The question now becomes less about escaping rapid rate rises and more about taking advantage of a potentially more favourable lending environment.

When refinancing might make sense

Several factors are combining to make the current market worth a closer look for homeowners with an existing mortgage.

Firstly, interest rates are showing signs of softening which gives borrowers a stronger position to renegotiate and refinance at more attractive terms. Acting ahead of any major drops could also help lock in more favourable rates before demand increases and lenders tighten their offers.

Another significant motivator is rising property values. Many homeowners have seen their property equity increase thanks to a rebound in home prices across several regions. This growth in equity can improve your loan-to-value ratio (LVR), making your loan more appealing to a broader range of lenders.

ABS figures show that the average external refinance loan sits at approximately $566,000, slightly less than the average new owner-occupier loan of around $660,000.ⁱⁱ This indicates that refinancers typically carry less risk, a point that lenders often reward with sharper rates or reduced fees. With more equity and a proven repayment track record, borrowers are in a strong position to negotiate.

Increased competition among lenders is also fuelling better deals.ⁱⁱⁱ With the refinancing market cooling slightly from its peak, lenders are again jostling for a shrinking pool of high-quality borrowers. Some are offering cashback incentives, while others are focusing on rate reductions or flexible features to win over homeowners considering a switch.

Access to better loan features, such as offset accounts, redraw facilities or more flexible repayment options, is also a key drawcard. These additions can provide long-term savings and improve overall financial flexibility.

When the timing might not be right

Despite the appeal of a better deal, refinancing does need some consideration as the timing isn’t always right.

If your current loan is relatively new, particularly within the first one to two years, the savings gained through refinancing may be cancelled out by upfront fees and lender exit costs, especially for those on fixed-rate loans, where break costs could be substantial.

Your borrowing profile is also a key consideration. If your finances have changed, lenders may not offer the most competitive terms or you may not qualify for refinancing at all.

Planning to sell your home in the near future? Refinancing might not give you enough time to recoup the costs associated with switching loans. Application fees, valuation charges, legal costs and potential discharge fees can add up, reducing or eliminating the benefits of refinancing.

Limited equity can also be a roadblock. If your loan-to-value ratio is high, refinancing options become more restricted. Lenders typically reserve their most attractive rates and offers for borrowers with strong equity positions, usually under 80 per cent. A higher LVR may result in higher interest rates or additional lender’s mortgage insurance (LMI) costs, which can significantly reduce the value of switching.

In a market where interest rates and property values continue to shift, the timing of your refinance is critical. It’s not just about chasing a lower rate. Assessing your current loan structure, your equity position, your financial profile and your future plans all play a part in determining whether refinancing makes sense for you and we are here to help you make your move when the time is truly right.

i, ii https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release 

iii https://www.rba.gov.au/publications/fsr/2025/feb/