Should You Refinance Your Home Loan in 2026? Rates, the Loyalty Tax and What to Check
Refinancing in 2026 may save many borrowers money because the gap between what existing customers and new customers pay has widened after three RBA rate rises this year. The cash rate sits at 4.35% as at July 2026, the average variable home loan rate is around 6.92% (Finder, July 2026), yet around a dozen lenders still advertise variable rates below 6% p.a. — so borrowers who haven't reviewed their loan recently could be paying more than they need to.
Why are so many Australians refinancing in 2026?
Refinancing volumes are near record levels. Owner-occupiers switched a record $42.9 billion in home loans to a new lender in the March quarter 2026, across 66,617 loans, according to ABS Lending Indicators data. Internal refinancing — renegotiating or restructuring with your existing lender — added a further $27.3 billion in the same quarter, up 30.1% year on year by value.
The driver is simple: rates went up, and repayments went up with them. When your repayment jumps, the difference between an average rate and a sharp rate stops being an abstraction and starts being real money every month. Borrowers across Melbourne's western suburbs — from Williams Landing to Point Cook, Tarneit and Werribee — are in the same position as the rest of the country: many are still on the rate their lender drifted them onto, not the rate a new customer would be offered today.
What has the RBA done to interest rates this year?
The Reserve Bank of Australia lifted the cash rate three times in 2026 — in February, March and May — taking it to 4.35% as at July 2026. The RBA then held the cash rate steady at its June 2026 meeting while it assesses how the economy responds, and its next decision is due on 11 August 2026.
For a borrower with a $600,000 variable loan over 25 years, those three rises mean repayments are roughly $274 a month higher than at the start of 2026, based on Finder analysis (July 2026). Whether rates rise again, hold or eventually fall, the practical point is the same: the spread between lenders is wide right now, and that spread is where refinancing savings come from. Rates and lender offers can change at any time.
What is the loyalty tax and how much could it cost you?
The "loyalty tax" is the gap between the rate a lender offers new customers and the rate it charges its existing ones. Existing customers at the big four banks typically pay around 0.30% to 0.50% more than new customers at the same bank, based on 2026 industry analysis reported by Mozo. On a $600,000 loan, a rate 0.40% above the new-customer rate adds roughly $1,600 or more in extra interest per year.
The loyalty tax exists because lenders compete hard for new business and rely on existing customers not checking. If you haven't reviewed your rate since last year — before this year's three rate rises — there is a reasonable chance you are paying above what the market would offer you today. A five-minute rate check is the cheapest financial health check available. You can model what a lower rate would do to your repayments with our loan repayment calculator, or compare two loans side by side with the loan comparison calculator.
When does refinancing make sense — and when doesn't it?
Refinancing typically makes sense when one or more of these apply:
- Your rate is well above the market. If comparable new-customer rates are 0.3% or more below yours, the maths may favour a switch even after costs.
- Your fixed rate is ending. Fixed loans usually roll onto the lender's standard variable rate, which is often not competitive. Reviewing your options before the rollover date puts you in control.
- Your situation has improved. If your property value has risen or your loan-to-value ratio has dropped below 80%, you may qualify for sharper pricing than when you first borrowed.
- You want different features. An offset account, redraw, or the ability to split between fixed and variable can be worth switching for, depending on how you use them.
- You want to consolidate debt. Rolling higher-rate debts into your home loan could lower total monthly repayments, though it may increase total interest over time if you stretch the term.
Refinancing may not make sense if your loan balance is small (fixed costs eat the savings), if you're on a fixed rate with high break costs, if your credit or income position has weakened since you borrowed, or if you plan to sell soon. Any new loan is subject to the lender's normal credit assessment and approval, and eligibility criteria apply.
What does refinancing actually involve?
The process is more straightforward than most borrowers expect:
- Review: compare your current rate, fees and features against what the market offers for your situation.
- Application: the new lender assesses your income, expenses, credit history and property value, much like your original application.
- Valuation and approval: the lender values your property and issues approval, subject to its normal credit criteria.
- Settlement: the new lender pays out your old loan and your repayments switch over.
Costs to factor in typically include a discharge fee from your current lender (often a few hundred dollars), government registration fees, and possibly an application or valuation fee with the new lender — though many lenders waive these. If your loan-to-value ratio is above 80%, lenders mortgage insurance could apply again, which can undo the benefit of switching, so this is worth checking before you apply.
How can a mortgage broker help you refinance?
A mortgage broker compares your existing loan against options from a wide panel rather than a single lender's product list. Brokio is a local mortgage broker based in Williams Landing serving Melbourne's western suburbs, comparing options from 40+ lenders — banks, non-banks and specialist lenders. We handle the comparison, the paperwork and the lender negotiation, and on most home loans there's no cost to you for our service, as the broker is paid by the lender.
Sometimes the outcome isn't a switch at all: a repricing request to your current lender, backed by evidence of what competitors are offering, can deliver a lower rate without refinancing. A broker can run that process for you and only recommend a full refinance where it may leave you better off.
Frequently asked questions
How much could I save by refinancing in 2026?
It depends on your current rate, loan size and remaining term. As at July 2026 the average variable rate is around 6.92% (Finder) while around a dozen lenders advertise variable rates under 6% p.a., so borrowers on older pricing may find meaningful room to move. Any savings depend on your circumstances and lender approval — there are no guaranteed outcomes.
Does refinancing hurt my credit score?
A refinance application places an enquiry on your credit file, which can have a small short-term effect. Multiple applications to different lenders in a short period have more impact, which is one reason a broker typically identifies the right lender first and submits one well-prepared application rather than several speculative ones.
Can I refinance if my fixed rate hasn't ended yet?
Usually yes, but your lender may charge a break cost, which can be significant depending on your rate, remaining fixed term and market movements. It's important to get the break cost quoted in writing and weigh it against the potential savings before deciding. In some cases waiting for the fixed term to end is the better move.
How long does refinancing take?
Most refinances settle within a few weeks of application, depending on the lender's processing times, valuation turnaround and how quickly documents are supplied. Fast-track processes at some lenders can shorten this. Your broker can tell you which lenders are currently moving quickly, as turnaround times change through the year.
Important information
This article contains general information only, current as at July 2026, and does not take into account your objectives, financial situation or needs. It is not personal financial, credit, legal or tax advice. Interest rates, lender policies, fees and figures quoted can change at any time. Any loan application is subject to the lender's normal credit assessment and approval, and eligibility criteria, terms, conditions, fees and charges apply. Consider seeking advice tailored to your circumstances before acting, and confirm current rates and offers directly with lenders or via official sources such as the Reserve Bank of Australia and the Australian Bureau of Statistics.