The Reserve Bank’s first interest rate increase in two years has quickly been passed on to borrowers, with many now facing higher monthly mortgage costs. For many borrowers, rising interest rates make it a smart time to review their home loan and assess whether refinancing could reduce costs or improve loan features.
While the move was widely anticipated, nobody can promise that there are not more to come. Changes like this are a reminder that reviewing your loan and refinancing is an important exercise that can help you save.
Why have interest rates gone up in Australia?
Interest rates rose sharply after the pandemic and stayed high as the Reserve Bank pushed to bring inflation under control. The pressure of high rates finally eased in early 2025, and the cash rate reached a low of 3.6% in August.
After a six-month plateau, the Reserve Bank changed course by raising the official cash rate by 0.25 percentage points to 3.85 per cent at its February 2026 meeting. This move was intended to combat inflation, which, despite signs of decline in some regions of the economy, remains above the central bank’s preferred target range.
At 3.8 per cent, inflation is currently above the goal range of 2 to 3 per cent. The RBA’s decision was made in part due to strong household spending, high service charges, and persistent labour market pressure. Unfortunately, it looks like we will not see rates start to drop again in the near future, with some reports suggesting inflation will be a problem until midway through 2027.
Will the rate increase affect your home loan?
Many major banks and lenders contacted clients in the days after the announcement to confirm that variable mortgage rates will increase in line with the cash rate adjustment.
How much could repayments increase?
For a home with a $650k mortgage, the 0.25 increase adds around $100-$130 per month to repayments.
If you have received a letter from your lender about a rate rise and it has been over a year since you last reviewed your loan, it may be time to take action. Doing so may help you secure a lower rate and help you to better manage repayments.
When refinancing may be worth considering
- Your assets and debt levels have changed
- Your income has increased
- You have been with the same lender for more than two years
- You are getting close to the limit of what you can afford each month
Can you negotiate with your current lender?
You may also wish to contact your existing lender to negotiate a more competitive rate; you can do this with the help of your Lend & Co mortgage broker.
It doesn’t hurt to ask the question
Reviewing your home loan and exploring refinancing can be a smart move, even when interest rates aren’t changing, because it gives you the opportunity to assess whether your loan is truly working for you and if there is potential to switch to a more competitively priced loan and save.
Fixed vs variable loans in a rising rate environment
With further interest rate increases not off the table (movement will depend on the global economy as well as inflation and unemployment figures), you may even want to explore the option to switch to a fixed rate loan so that increases do not affect you in the short term.
Refinancing isn’t just about the interest rate
Navigating a rate increase environment is not just all about chasing a lower rate. It is important to understand lender policy, long term pricing behaviour, and which lenders are likely to be competitive for your situation.
That’s where talking to Lend & Co now might pay off, as we know all their policies and rates in detail and can guide you on which lender might be a good refinancing solution for you during this time.
Refinance options with Lend & Co in Melbourne
Book a free strategy call with a home loan specialist from Lend & Co to check in on your existing home loan and find out if refinancing is an option for you.
