At What Interest Rate Should I Consider Refinancing in Melbourne?

By Lowest Interest Rates Australia

Introduction

I’ll never forget the first time I checked my home loan statement after a few years of comfortable repayments. My interest rate had quietly crept up — and what used to feel like a good deal suddenly looked… not so great. After a bit of coffee-fueled Googling and some late-night spreadsheet math, I realised I could save thousands by refinancing.

That got me thinking: how do you know when it’s the right time to refinance? If you’re a homeowner in Melbourne, you’re probably wondering the same thing — especially with interest rates fluctuating and lenders offering new deals left, right, and centre.

Refinancing can feel like changing gym memberships — slightly annoying at first, but totally worth it when you see the savings roll in. In this article, I’ll break down exactly when and why you should consider refinancing, what interest rate difference makes it worthwhile, and how a mortgage broker can make the process smooth, stress-free, and profitable.

Let’s dive in!

Table of Contents

1. What Is Refinancing a Home Loan?
2. Why Homeowners in Melbourne Refinance
3. When Should You Consider Refinancing?
4. How Much of a Rate Difference Makes Refinancing Worth It?
5. Example: How Much You Could Save by Refinancing
6. Other Reasons to Refinance (Beyond the Rate)
7. Is Now a Good Time to Refinance in Melbourne?
8. How a Mortgage Broker Can Help You Refinance Smarter
9. Common Refinancing Mistakes to Avoid
10. Final Thoughts — Speak to Lowest Interest Rates Today

What Is Refinancing a Home Loan?

Refinancing simply means replacing your current mortgage with a new one — usually with a different lender — to get a better interest rate or improved loan features. It’s a bit like trading in your old car for a newer model that’s more efficient and cheaper to run.

When you refinance, you can either:

• Switch to a lower interest rate to save money on repayments, or
• Access home equity to fund renovations, investments, or consolidate debt.

Most Australians refinance every 3–5 years, but in Melbourne’s competitive property market, savvy homeowners often review their loans annually — especially when rates start to shift.

Why Homeowners in Melbourne Refinance

There’s more than one reason Melburnians refinance their home loans. Here are the most common motivations:

• Lower interest rates: The big one. Even a small drop can save thousands per year.
• Better loan features: Access to offset accounts, redraw facilities, or flexible repayment options.
• Consolidating debt: Combining high-interest debts (like credit cards or personal loans) into a cheaper home loan rate.
• Accessing equity: Using the increased value of your property to fund renovations or investments.
• Improved financial position: Refinancing can reflect your better credit score or higher income since you first took out your loan.

Whatever your reason, refinancing is about aligning your home loan with your current lifestyle and financial goals — not just sticking with what was right five years ago.

When Should You Consider Refinancing?

The best time to refinance isn’t just when rates drop — it’s when your current deal stops working for you. Here are some telltale signs:

• Your rate is 0.5% or more higher than the best rates currently on the market.
• Your fixed term has ended, and your loan rolled onto a higher variable rate.
• Your lender hasn’t offered you a discount or rate review recently.
• You’ve built up equity (your home’s value has increased, or you’ve paid down your loan).
• Your financial situation has improved — higher income, better credit score, or reduced debt.
• You want more flexible features, like an offset account or redraw facility.

Pro tip: Don’t wait until your rate feels painful. Start reviewing your loan every 12 months — that’s what most brokers recommend for homeowners in Melbourne.

How Much of a Rate Difference Makes Refinancing Worth It?

Generally, if you can lower your interest rate by at least 0.5% to 1.0%, refinancing is worth considering. Even small changes can make a big impact over time.

For example, if you have a $600,000 mortgage and reduce your interest rate from 6.5% to 5.9%, you could save over $2,400 per year in interest. Over the remaining life of the loan, that’s tens of thousands of dollars saved — all without changing your property or income.

Of course, refinancing isn’t just about the rate. You’ll want to factor in:

• Exit fees from your current lender (if applicable)
• New lender application or valuation fees
• Any government charges (usually minor)

That’s where a broker can run a full “refinancing cost-benefit analysis” to ensure you’re coming out ahead.

Example: How Much You Could Save by Refinancing

Let’s crunch some numbers. Suppose you bought a home in Preston five years ago with a $600,000 loan at 6.4% interest. You’ve since paid it down to $520,000, but your rate hasn’t changed much.

Your broker finds you a new loan at 5.6% with a similar loan term and features.

Before Refinancing:

• Loan amount: $520,000
• Interest rate: 6.4%
• Monthly repayment: $3,270

After Refinancing:

• Loan amount: $520,000
• Interest rate: 5.6%
• Monthly repayment: $2,980

Monthly savings: $290

Annual savings: $3,480

Five-year savings: Over $17,000

And that’s not even factoring in offset benefits or the ability to make extra repayments to pay off your home faster. Suddenly, refinancing looks a lot like giving yourself a raise — without working any extra hours.

Other Reasons to Refinance (Beyond the Rate)

While interest rate savings are the main drawcard, refinancing can also improve your financial flexibility and help you achieve new goals. Here’s how:

1. Accessing Home Equity

If your home has risen in value, you can use the equity (the difference between your home’s value and your loan balance) to fund renovations, buy an investment property, or even start a business. Melbourne’s strong property market has made this a popular strategy for many homeowners.

2. Consolidating Debts

Refinancing can help you roll high-interest debts (like credit cards or personal loans) into your home loan, where interest rates are much lower. It simplifies your finances and can reduce monthly repayments significantly.

3. Changing Loan Features

Maybe your current loan doesn’t offer an offset account or redraw facility. Refinancing gives you access to new products with more useful features — perfect if you’re now earning more or saving more than when you first applied.

4. Adjusting the Loan Term

Refinancing can shorten your loan term (to pay it off faster) or extend it (to reduce monthly repayments temporarily). Either way, you gain control over your financial timeline.

Is Now a Good Time to Refinance in Melbourne?

In 2025, interest rates in Australia remain relatively high compared to a few years ago, but competition among lenders is fierce. Many banks and non-bank lenders are offering cashback deals, rate discounts, or fee waivers to attract new customers.

That means Melbourne homeowners could still find opportunities to save, especially if:

• Your rate hasn’t been reviewed in over a year
• You’re on your lender’s “standard variable rate” (often higher than the market average)
• You’ve improved your equity or financial standing since your last loan

Even if rates don’t drop dramatically, refinancing could still mean better features, flexibility, or customer service — all worth considering in a fast-moving market like Victoria’s.

How a Mortgage Broker Can Help You Refinance Smarter

Refinancing might sound like a lot of paperwork, but a good mortgage broker takes all that stress off your plate. Here’s how they make the process easy and worthwhile:

• Compare dozens of lenders: Brokers like Lowest Interest Rates have access to a wide lender panel — often 30–60 lenders — giving you far more choice than walking into one bank.
• Negotiate a better deal: Brokers can often secure discounts and rate reductions that aren’t advertised publicly.
• Calculate your true savings: They’ll run the numbers on your refinancing costs vs potential savings to ensure it’s financially smart.
• Handle all the paperwork: From applications to settlement, your broker manages the process for you.
• Ongoing support: The best brokers review your loan regularly to ensure it stays competitive year after year.

With professional help, refinancing becomes simple — and the savings can start appearing in your account faster than you might expect.

Common Refinancing Mistakes to Avoid

Before you jump into refinancing, keep an eye out for these common pitfalls:

• Ignoring fees: Always consider exit fees, break costs, and new setup fees before switching.
• Focusing only on the interest rate: A lower rate isn’t always better if you lose valuable features like offset accounts or redraws.
• Not checking comparison rates: The comparison rate includes most fees, showing the real cost of the loan.
• Overextending the term: Refinancing to a new 30-year loan can reset your progress unless you maintain similar repayments.
• Not reviewing regularly: Rates and deals change often — review your loan at least once a year.

A mortgage broker helps you navigate all of this, ensuring you avoid costly mistakes and get a deal that genuinely benefits you long term.

Final Thoughts — Speak to Lowest Interest Rates Today

So, at what interest rate should you consider refinancing in Melbourne? The simple answer: whenever your rate is noticeably higher than what’s available on the market — even by 0.5% or more. That small difference could mean thousands of dollars back in your pocket each year.

But refinancing isn’t just about chasing a lower rate — it’s about improving your financial flexibility, securing better features, and aligning your loan with your goals as they evolve.

The expert team at Lowest Interest Rates can help you review your current loan, compare rates from dozens of lenders, and handle the entire refinancing process for you — all while making sure it’s the right move for your situation.

Don’t leave money on the table.
Visit LowestInterestRates.com.au today to speak with a friendly Melbourne mortgage broker who’ll help you refinance smarter, faster, and with confidence.