By Will Kiln | Published 7 October 2026 | Last Updated 7 October 2026
Interest rates, lender policies and market data referenced in this article are current as at October 2026. The RBA cash rate is 4.60%. Rates and policy change frequently — contact us for the latest figures.
Most refinancing advice was written for a different market. It assumes rates are falling, that a sharper lender is always waiting, and that the only question is whether the savings clear the switching costs.
That's not the market we're in. The RBA lifted the cash rate four times in 2026, most recently a unanimous 25 basis point increase to 4.60% on 29 September — the highest cash rate since 2011. The next decision lands on 3 November, and at least one major bank is forecasting a further increase before year-end.
So the question has changed. It's no longer "can I save money by switching?" It's "what's the best structure I can get into before the next repayment increase lands?"
That's still a refinancing question. It just has different answers.
The loyalty gap widens when rates rise
Here's the thing that gets missed. When the cash rate moves up, lenders pass the increase through to existing borrowers on the same day — usually within two weeks of the announcement, applied to every variable customer at once.
But new-customer pricing doesn't move in lockstep. Lenders still need volume. They still discount hard to win a new loan onto their book, because a mortgage is a 20-year annuity and the cost of acquiring one is worth wearing. What they don't do is proactively pass that same discount back to the customer who settled three years ago and hasn't rung them since.
The result is that the gap between what a bank charges its back book and what it offers its front book tends to widen through a tightening cycle, not narrow. That gap is the loyalty tax, and in a rising market it's usually worth more than it was at the bottom of the cycle.
We cover exactly how to measure and claw back that gap in The Loyalty Tax.
Four refinancing moves that make sense in a rising market
1. Repricing before refinancing
The fastest win isn't a refinance at all. It's calling your existing lender's retention team and asking them to match what they're offering new customers.
Lenders keep a discretionary pricing tool for exactly this. The discount you get depends on your loan size, your loan-to-value ratio, your repayment history, and — bluntly — on how credible it is that you'll leave. A borrower who has a competing written offer in hand gets a materially better answer than one who just asks nicely.
Repricing costs nothing, takes about a week, and doesn't reset your loan term. It should always be step one. If it works, you're done. If it doesn't, you now know precisely what you're refinancing away from.
2. Restructuring for cash flow, not headline rate
If repayments are the pressure point rather than the rate itself, there are levers that a refinance can pull which repricing can't:
- Extending the loan term. Resetting a loan with 22 years remaining back to 30 years reduces the monthly repayment noticeably. It also costs you more interest over the life of the loan — this is a cash-flow trade, not a saving, and it should be a deliberate one.
- Splitting fixed and variable. Fixing a portion caps part of your exposure without locking you out of extra repayments on the rest. In a market where the next move is more likely up than down, a split is often the honest answer for borrowers who want certainty but not a straitjacket.
- Interest-only, temporarily. Rarely optimal, occasionally the right call for an investment property where cash flow is genuinely tight. It's a bridge, not a destination.
- Consolidating higher-cost debt. Credit card and personal loan rates haven't moved down either. Rolling them into a mortgage cuts the interest rate dramatically but stretches the term — which is a trap unless you handle it properly. We've written about when consolidation helps and when it doesn't.
3. Moving while you still qualify
This is the one people get wrong.
Borrowing capacity falls as rates rise, because lenders assess you at an assessment rate roughly three percentage points above the actual rate. With variable rates where they are, most borrowers are being tested at somewhere around 9.75%. Every further hike pushes that test higher and shrinks the pool of lenders who will take you.
If your circumstances are solid today, today is the cheapest your refinance will ever be in approval terms. Waiting to see whether rates peak is a reasonable instinct and a poor strategy — because the thing you're waiting for is the same thing that closes the door.
4. Releasing equity before values soften
If you have a renovation, a deposit for the next property, or a business need that will require equity in the next 12 months, drawing it as part of a refinance now is usually cheaper and simpler than a standalone top-up later. Valuations are assessed at the time of application, and lenders tighten cash-out policy when they get nervous.
When refinancing genuinely isn't worth it
We'd rather tell you not to switch than put you through a process for nothing. Sit tight if:
- You're on a fixed rate with meaningful time left and a break cost that swamps the benefit. Break costs rise when market rates fall and shrink when they rise, so check the actual number rather than assuming.
- Your loan balance is small — under roughly $200,000 — and the fixed switching costs eat most of a rate improvement.
- You're planning to sell within 12 months. The costs won't amortise.
- Your credit file has a recent blemish. Wait for it to age rather than collecting a decline. See why lenders say no.
- Your existing lender has already repriced you to something genuinely sharp. It happens.
A worked example
Illustrative only — your numbers will differ.
A Lower North Shore couple, $980,000 owing, 26 years remaining, currently on 7.04% variable with a major bank.
- Repricing result: lender offers 6.69%. Saves roughly $215 per month, costs nothing, takes six days.
- Refinance offer elsewhere: 6.44%, with $0 application fee and a $350 discharge cost from the outgoing lender. Saves roughly $370 per month against the original rate.
- Difference between the two paths: about $155 per month, or $1,860 a year, in exchange for four to six weeks of process.
For that borrower, the refinance wins. For a borrower with $280,000 owing, it very likely doesn't — the repricing call is the whole answer.
That's the calculation worth doing properly, and it's the one most people skip.
Frequently asked questions
Is it a bad idea to refinance when rates are going up?
No. Refinancing doesn't lock you into the rate cycle — it changes which lender's pricing you're exposed to. In a rising market the gap between new-customer and existing-customer pricing typically widens, which is precisely when switching is most valuable.
Will refinancing be harder if rates rise again?
Generally yes. Lenders assess your capacity at around three percentage points above the actual rate, so each increase raises the bar you have to clear. Borrowers close to their capacity limit have a narrowing window.
Should I fix my rate before the next hike?
Fixed rates already price in expected future moves, so fixing after markets have anticipated a rise doesn't get you ahead of it. Fixing is about certainty of repayment, not about beating the RBA. A split structure suits most borrowers better than an all-or-nothing choice.
How long does a refinance take in 2026?
Typically four to eight weeks from application to settlement, depending on the lender and how quickly documents come together. Some lenders complete a straightforward refinance considerably faster.
Thinking about your options before the next rate decision? We'll run the repricing conversation with your existing lender first, and only recommend switching if the numbers genuinely justify it.
This article provides general information only and does not constitute personal financial advice. Rates, costs and savings are indicative and will vary based on your individual circumstances and chosen lender.
Cumulus Capital Pty Ltd (ABN 16 695 377 229), Credit Representative Number 577081, is authorised under Australian Credit Licence Number 389328.