“The May rise is a prompt to check your competitiveness. Many variable borrowers are paying a loyalty premium that has grown alongside rate increases.”
The RBA’s third 2026 rate rise on 5 May has been passed on by all major lenders to variable rate home loan customers. Whether that prompts a refinance depends on your current rate, your loan balance, and what’s available in the market right now.
The loyalty premium problem
In rising rate environments, banks tend to pass on hikes to existing customers immediately but compete more aggressively on new business rates. It is common for a borrower who has held the same loan for 3–5 years to be paying 0.3–0.6% more than a new customer at the same bank would receive today. On a $600,000 loan, 0.4% is $2,400 per year.
The break-even calculation
If refinancing costs $1,200 in total (discharge, valuation, application) and the rate saving is $150 per month, break-even is 8 months. Over a 5-year hold with the same lender, the total saving is approximately $8,000 after costs. The break-even period is the key number.
When to refinance and when to negotiate instead
Before submitting a formal refinance application, call your existing lender’s retention team with a specific competitor rate in hand. If your lender matches or comes close, you may be able to capture most of the saving without switching. If they don’t move, the refinance calculation becomes straightforward.
Who shouldn’t rush to refinance right now
Borrowers in the final six months of a fixed term who face meaningful break costs. Borrowers who have recently changed employment and may have trouble meeting servicing requirements. Borrowers who are planning to sell within 12–18 months — the break-even period may not be reached before the property changes hands.
→ You may wish to speak with a licensed mortgage broker to assess your personal circumstances. This is general information only. Individual circumstances vary and scheme details change regularly. Verify current eligibility, caps, and terms with official sources before making decisions. Speak with a licensed mortgage broker for advice tailored to your situation. All loans are subject to lender approval.
Sources: RBA, Monetary Policy Decision 5 May 2026; ASIC MoneySmart, Refinancing Your Home Loan 2025; MFAA Industry Intelligence Service Report 2025.
