Is Now the Right Time to Refinance Your Home Loan?

Australia’s borrowers have a reprieve as the RBA holds the cash rate steady in April 2025. With one decrease in the last 15 months since a .25% increase, the cash rate is what it was in June 2023 at 4.1%. Inflation has fallen substantially since the peak in 2022. Considering refinancing? Here’s what’s involved and how to decide if it’s the right time.

Which way will interest rates go?

The Reserve Bank of Australia has held the cash rate steady at 4.1%. Over three years, the rate has risen from a historic low of 0.1% to 4.35% & down to 4.10%, remaining unchanged since February 2025.

The RBA Board’s assessment is that monetary policy remains restrictive. The continued decline in underlying inflation is welcome, but there are nevertheless risks on both sides and the Board is cautious about the outlook.

Major bank economists predict rates may start to fall from May to year-end, with CommBank, NAB, and Westpac expecting the 4.10% cash rate, eventually dropping to 3.35% by late 2025.

ANZ forecasts a similar outcome but with the first cut in August 2025, and rates dropping to a level of around 3.85%.

What are the reasons to refinance?

Whether you’re looking to save money, access different features or consolidate your debt, refinancing or changing your home loan could make sense in the following scenarios:

1. You want a lower interest rate. Every lender uses different measures to set their interest rates, so it’s worth getting advice from a Lending Connections broker who can help you assess interest rates that may be available to you.
2. You want a loan that suits your current needs. Features like offset accounts, the ability to make extra repayments, or a split between variable and fixed rates offer flexibility and the option to pay off your loan sooner.
3. You want a fixed rate home loan. Knowing how much your repayments are makes it easier to budget and plan for. If you’re coming to the end of a fixed rate term, you may be able to refinance to a more flexible home loan or a favourable interest rate.
4. You need to pay off your other debts. Consolidating debts like personal loans, car loans or credit cards into your mortgage simplifies your finances and could save you money on interest charges. Terms not stretched out to 30 years (unless required), think of a $6,000 Credit card debt at 21% or at 5.89%.
5. You need to access equity. Whether you’re renovating your home or considering investing, accessing your equity lets you tap into the extra value in your home to pay for things like an extension or upgrade to your home, a family holiday, or an investment property.

How to refinance the mortgage?

If you’re confident that refinancing is right for you, here are some steps to take to get things underway. Otherwise, Get professional advice.

1. Assess your current situation. Get clear on why you’re refinancing and what it is about your current home loan that isn’t working for you to be sure the benefits outweigh the cost.
2. Compare home loans. Look at all the fees and charges associated with a new loan, as well as features and add-ons that are important to you.
3. Determine the costs and your borrowing power. Talk to a Lending Connections broker and use online calculators to work out whether a switch will help you save money.
4. Apply for a home loan. Typically a bank or lender will assess your income and mortgage repayment history, as well as other loans and financial commitments. They may also complete a property valuation to work out how much your home is worth.
5. Approval and settlement. Once your application is approved, you’ll receive a letter of offer and contract for your new home loan. When you’ve signed the loan contract, settlement occurs, and your new home loan is used to pay off your current home loan.

Get professional advice

Navigating the complexities of refinancing on your own can be challenging. Work with a finance adviser from Lending Connections, to get a financial plan that’s tailored to your circumstances. They can also provide expert advice to help you make informed decisions about refinancing, and help you get the most out of your mortgage. Contact a Lending Connections mortgage broker today to find out more about your options for refinancing.

 

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.