2025 has brought renewed discussion in Australia of refinancing existing mortgages. Following years of rising interest rates, a changing economy, and higher living costs, many homeowners are rethinking their financial game plans, and refinancing has taken centre stage again.
With indications the Reserve Bank of Australia (RBA) will likely start cutting rates in the coming months, for some borrowers, refinancing could deliver significant savings. But is it the right thing for everyone? As with most financial matters, whether it’s worth refinancing depends on your situation.
In this blog, we explain everything you need to know about refinancing in 2025, including how it works, when it makes sense to refinance, when it doesn’t, and how to do it right, all specifically for Australian homeowners.
What is refinancing?
Refinancing is when you trade in your current mortgage for a new one — hopefully, with improved terms. You can either do it with your current lender or switch to another. And while thousands of Australians refinance to obtain a lower interest rate, there are some other frequent reasons for doing so.
You might refinance to:
- Get a cheaper monthly payment.
- Convert from a variable to a fixed interest rate (or the other way around).
- If you wanted to renovate your home or invest in something else, just unlock equity in your home.
- Combine any high-interest debts (like credit cards or personal loans).
- Alter your loan term (from 30 years to 15 years, for instance).
The main thing is that refinancing should make you better off financially, either today or in the future.
What’s Going on with Interest Rates in 2025?
As of early 2025, the official cash rate (by RBA) is still high at 4.35% after the RBA raised the cash rate on multiple occasions over the past 2 years in order to tackle inflation. Consequently, most mortgage rates currently range from 5.7% to 6.3%, depending on the lender and the borrower’s profile.
But things might be changing. Inflation looks to be stabilizing, and the economy has slowed, fueling speculation that the RBA might cut the cash rate later this year. Some lenders are already making changes to their refinance products in preparation for this, providing better deals for customers who are hanging on to them.
So what does that mean for homeowners?
- Come mid- to late 2025, fixed-rate offers may look more appealing.
- Could slowly start to decrease variable rates
- Lender competition is increasing, particularly in refinance.
So, although we haven’t yet returned to the ultra-low rates seen in 2021, the landscape is getting easier for those wanting to refinance.
Why More Australians Are Seeking to Refinance
Many Australians are feeling motivated to review their home loans in the current economic environment. Here are the top reasons homeowners are thinking about refinancing this year:
Expired Fixed-Rate Loans
Thousands of fixed-rate loans originated during the pandemic will expire in 2025. Lots of borrowers are experiencing a “fixed-rate cliff,” going from less than 2 % to more than 6%. Refinancing could cushion this blow by obtaining a better rate than what their current lender is providing.
Rising Repayments
On a $600,000 mortgage at 6.2% interest (a common example used in the media), repayments will exceed $3,700 a month. Refinancing into a loan with a lower rate (say, 5.7 %) could save hundreds a month on a payment.
Equity Growth
Property prices in large swathes of Australia, especially Brisbane, Perth, and some regional parts of NSW, have risen sharply since 2020. If your home has increased in value, you may be able to tap equity and use it for renovations, for investing, or for consolidating other debts.
Loan Features and Flexibility
Many old loans don’t feature offset accounts, redraw facilities, or extra repayment options. These features are common in many modern loan products, and refinancing can give you greater control (and financial flexibility).
When Does It Make Financial Sense to Refinance?
Refinancing can deliver real benefits to consumers, but only if personal circumstances warrant it. But here’s when it’s typically worth considering:
- Your current rate is well over 0.5% above the market average.
- Even a minor rate cut can result in savings of thousands of dollars over the life of your loan.
- You have a minimum of 20% equity in your home.
This also allows you to avoid paying Lender’s Mortgage Insurance (LMI) again, which can be expensive in the future.
- You plan on living in your home for about 3-5 years.
- This gives you enough time to amortize the costs of switching loans.
- Your income is steady , and your credit history is clean.
This could help you obtain competitive rates and approval from potential lenders.
Let’s say you refinance a $500,000 loan from 6.3 % to 5.7 %. Your monthly payments could decrease by about $160, close to $2,000 in savings a year. Over five years, that’s $10,000 kept in your pocket, before any fees.
Not Turning to Refinancing
But while it can help, refinancing is not always a good financial move. There are several such instances in which it may work against you:
You’re Moving Soon
If you plan to sell your property within 1–2 years, refinancing may not allow you the time to break even after fees.
You Have Less Than 20% Equity
If your property hasn’t gone up much in value or you recently bought it with a small deposit, refinancing may mean paying LMI again, wiping out savings from getting a lower rate.
You Have Unsteady Income or Bad Credit
Casual workers, freelancers, or those with low credit scores might find it harder to get better terms on loans. If so, staying with your existing lender could be the safer alternative, or improving your profile first.
At times, the benefit from refinancing is slight. If your lender has already passed along rate cuts or offered a robust retention offer, the additional time and expenses may not make sense.
Everything You Need to Know About Refinancing in 2025
If you’re thinking about refinancing this year, here are some tips to ensure you do it right:
1. Know Your Property’s Value
Come for a free valuation, or see what has sold near you. The more equity you have, the better your odds of a good deal.
2. Review Your Credit Score
Lenders will check your credit report before giving you your new loan. Be sure that there are no mistakes and no outstanding debts that could hurt you.
3. Shop Around (or Use a Broker)
Don’t settle for the first offer — shop lenders or work with a mortgage broker who can help you access a greater variety of loan products that fit your needs.
4. Understand the Costs
Refinancing has costs, including
- Discharge fees ($300–$600)
- Application or installation fees (up to $1K)
- Property valuation fees
- Settlement and legal charges
Be sure to ask your new lender whether they offer cashback incentives to help mitigate these costs — several banks are currently offering $2,000 or more for refinancing customers.
5. Do a Break-Even Analysis
When you save monthly money, how long will it take to recoup your switching costs? This is referred to as your “break-even point,” and if it’s longer than how long you intend to remain in the property, refinancing may not make sense.
For many Australians, particularly in the face of exiting low fixed rates or higher repayments, refinancing may provide a lifeline to relieve pressure and regain control. For others, remaining in place may be more logical, at least at the moment.
The most important step? Run the numbers. Compare deals. Ask questions. And by all means talk to a licensed mortgage broker that can help you understand the process from an unbiased standpoint.
OM Financial Services is the place to go for expert advice on refinancing and custom financial solutions. Our dedication lies in assisting Australian homeowners in making well-informed decisions to reach their financial objectives.
Contact us at 0478 876 967 / Book your consultation to take a step towards securing a brighter financial future.
Turn your mortgage stress into savings. Refinance today and take charge of your financial future with ease!
