There is a well-documented gap between what banks charge new borrowers and what they charge existing ones. It is not malice, it is marketing budget: acquiring a customer is worth discounting for, keeping one who isn't asking questions is not. The gap tends to widen the longer you stay.
Step one: find your actual rate
Not the rate you signed up for — the rate you're paying now. It is on your most recent statement or in your banking app under loan details. Write it down. If your loan is more than three years old and you have never asked for a review, there is a decent chance the number surprises you.
Step two: compare it to what's live today
Compare like with like: an owner-occupier principal-and-interest variable loan against the same, an investment interest-only loan against the same. Comparison rates are more useful than headline rates because they fold in the standard fees, though they assume a $150,000 loan over 25 years, so they understate fee impact on larger loans.
The cheapest phone call you'll make: ring your current lender's retention team and ask what they can do. Sometimes they'll match the market on the spot to keep you. If they do, you've saved money without refinancing at all. If they won't, you now know exactly what your loyalty is worth to them.
Step three: count the switching costs honestly
Three costs decide whether the move is worth it.
- Discharge and settlement fees from your current lender — usually $300 to $400 all up.
- Break costs if you're in a fixed term. On a variable loan this is zero. On a fixed loan it can run to thousands, depending on where rates have moved since you fixed. Always ask for the figure in writing before deciding.
- New LMI, if your equity is under 20%. This is the one that quietly kills otherwise sensible refinances, because LMI is not portable between lenders — you pay it again from scratch. If you're at 85% loan-to-value, staying put is often the better answer.
Step four: do the arithmetic
On a $600,000 loan with 25 years remaining, dropping from 6.60% to 6.05% saves roughly $200 a month. Against about $700 in switching costs, you're ahead within four months. That is a clear yes.
The same move on a $250,000 loan with eight years left saves far less, and the costs take longer to recover. That is a maybe, and it depends on what else you're trying to achieve.
The reasons that aren't about rate
Plenty of good refinances are not primarily about the interest rate:
- Debt consolidation — rolling a car loan and credit cards into the mortgage cuts the monthly outgoing sharply. The catch is stretching short-term debt over 30 years, which costs more in total interest unless you keep the repayment level and pay it down faster.
- Releasing equity — for a renovation, or the deposit on an investment property.
- Getting features you didn't have — a proper offset account against a large cash balance can save more than a small rate difference.
- Restructuring after a change — a separation, a new business, or an investment property that has changed how the loan should be split.
What refinancing actually involves
It is a full application: payslips, statements, identification, a valuation on the property. Three to four weeks is typical. You do not need to move your everyday banking, and your repayments continue uninterrupted through the changeover.
Run your numbers through the repayment calculator first. If the gap looks meaningful, send us your current rate and balance and we'll tell you within a day whether it's worth doing — including when the answer is no.