Should I refinance if interest rates drop?

When you catch word that interest rates are finally dropping, it’s only natural to want to do something – anything – to improve your situation. 

So, should you consider refinancing now rates have dropped? 

In short, yes – dropping rates is a great time to review your home loan. 

Checking in with a mortgage broker is quick, easy and free. They’ll crunch the numbers, assess your current rate, and let you know if you’re already on a great deal (A+ for you) or if refinancing is worth your while. 

Either way, it’s a win-win.

Let’s talk about interest rates ( …dropping interest rates, that is)

When the Reserve Bank of Australia announces a decrease in the cash rate, it often means banks will follow suit and drop their home loan interest rates. This will come as a relief to homeowners (like what we’re seeing in 2025), especially after extended periods of rate rises.

So if interest rates are dropping for the first time in a while, you might be wondering if it’s time to refinance to get yourself a better deal on your home loan (hint: it’s a great cue to check in).

So, should I refinance if interest rates drop?

Dropping interest rates is a great time to review your home loan. When you work with a broker, you’ll either get confirmation you’re already on a great rate or find out refinancing is worth your while. So it’s a win win. 

If you’ve noticed there’s a lower rate out there than what you’re on, refinancing is a simple way to make the most of the situation. Even finding a loan that’s a fraction of a percentage lower than your current rate could save you thousands over the life of your loan. 

Not only that, by switching lenders you could find options with less (or no) fees. In fact, lenders often know when there’s a lot of people out there looking for a better deal in a rate cut environment – so they often want to grab the attention of new customers with some enticing offers.

So, it’s always a good idea to (at the very least) check in with your home loan when interest rates drop – and whether or not you go ahead with refinancing depends on your unique situation, fees (more on that in a minute) and what’s going on in the market. 

Other scenarios you might refinance your mortgage

Refinancing isn’t always done in response to interest rate cuts. There might have been a change to your situation which leads you to check in with your loan, things like:

• You’re coming off a fixed rate – a fixed rate home loan is when your interest rate and repayments stay the same for a predetermined period. But when this period runs out, you can get caught out paying a much higher rate. A good time to revisit your loan.

• Your home has increased in value and you want to access equity – equity is the difference between the value of your property and the size of the loan you have on that property. If your property has gone up in value, you might be able to borrow a little (or a lot) more money to help you reach other goals. You might also be eligible for a better rate as lenders typically offer lower rates to clients who own more of their property.

• You want to buy another property – refinancing can allow you to access the equity in your current property to help fund your new one.

• There’s a change to how much you’re earning – if you’re suddenly earning more or less money, you could refinance to work out a different loan that better matches your income. 

• It’s been a few years since you last refinanced – it’s often a good idea to refinance every few years (especially in a rate cut environment). You never know what savings could be up for grabs. 

Learn more about the reasons for refinancing.

Regardless of your reason, refinancing is all about landing a better deal so you can reach your goals. Sooner.

What about the costs of refinancing a mortgage?

As we’ve mentioned, refinancing is one way (a really good way) to make the most of dropping rates. But let’s not forget, it does come with some fees. So before you start the process, it’s a good idea to weigh up the costs versus benefits for your situation (a mortgage broker will walk you through this).

Common costs of refinancing a mortgage are Government fees, bank discharge fees, fixed rate break fees, package fees and more. These fees do vary based on the state your property is in, and your current lender, but they typically amount to about $500-$1,000. Of course, your mortgage broker will consider these costs when determining how much you could save when refinancing.

If you’re wondering whether the costs of refinancing your home loan are still worth it for you, right now, chat with a mortgage broker (or Finspo home loan expert).

If rates are forecasted to continue to drop, should I refinance now or later?

Ah, the million dollar question. Should you wait it out until rates drop further, saving you the effort of refinancing again and again? Or should you refinance now since we don’t know, for sure, what’s in store for the future? 

As a general rule of thumb: if there’s a better rate out there than what you’re on, it’s usually worth refinancing. Afterall, waiting can cost you money today, only for the hope of a better rate tomorrow. 

A good broker will always weigh up your unique situation, compare your rate to the current market, and confirm if refinancing is worth it.

Is there a limit to how much you can refinance?

There’s no legal limit to how much you can refinance. But given refinancing comes with a few fees, make sure you weigh up whether this is right for you with help from an expert (that’s us!)

Can I refinance if I’m on a fixed rate?

If you’re on a fixed interest rate when market rates drop, you might not benefit (at least straight away) from the lower rates. Fixed rates mean exactly that – you’re fixed to that rate for the duration of your fixed term. 

You can technically refinance in the middle of your fixed term, but this will often incur break costs, so it’s not always recommended. You can work with a broker to assess whether the benefit of refinancing will outweigh the downside of break costs. 

So, should I refinance if interest rates drop?

In many cases, yes. A rate cut environment is a cue for homeowners to revisit their loan and see if refinancing is worth it for them (a lot of the time, it is). 

You can chat with a Finspo home loan expert to see if refinancing is right for you (with no obligation to go ahead –  plus it’s free!)

You’ll be shocked at how easy the process is…

1. Book an appointment with a Finspo expert (online, phew!)
2. Tell us about yourself and provide any additional info
3. We’ll present your options so you can choose your approach

Get started with Finspo today.

About us

Finspo is an online mortgage broker, offering home loan solutions to clients Australia-wide. Our point of difference is that not only do you get a great Finspo mortgage broker, you also get a proposition supported by cutting-edge technology to give you a five-star mortgage broking experience.

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