Time to read : 6 Minutes
So, you’re halfway through refinancing your home loan when the Reserve Bank of Australia (RBA) decides to shake things up. Maybe rates rise. Maybe they fall. Maybe they do that awkward pause where no one knows what’s coming next. Whatever the case, you've now got a half-completed refinance application and a whole new interest rate environment to navigate.
But there’s no need to panic. Let’s dive into how interest rate changes can affect you – when you’re in the middle of refinancing – and what you can do about it. But first…
Why do interest rates change anyway?
The main reason is that when the RBA adjusts the official cash rate to manage inflation, growth, and all the other economic bits that make economists excited, this affects how much the banks pay to borrow the money that they then lend out to you.
Like any other product, when the store’s cost of goods change, so does the price they charge the end buyer… in other words, you.
When the RBA moves, banks tend to follow, adjusting their home loan rates up or down depending on the RBA’s direction. Which is fine – unless you’re in the middle of refinancing and suddenly feel like you’re negotiating with a moving target.
What happens if interest rates go up while you’re in the middle of refinancing?
You’ve just experienced a real-world test in timing the market – and missed by a bit. Don’t worry, it happens to the best of us. Here’s what you can do:
Recheck your numbers: a higher rate can affect how much you’ll save by refinancing. What looked like a brilliant money-saving move yesterday might now be… less brilliant.
Speed things up: if you haven’t locked in a rate (we’ll get to that shortly), now might be the time to hustle. The longer you wait, the more those higher rates might creep into your shiny new home loan.
Revisit your goals: maybe you're refinancing to consolidate debt, free up cash, or just get a better deal. Re-evaluate whether those goals still make sense with your new numbers.
And what if interest rates fall?
You might be on your way to a better deal than you thought. But you still need to act smart. Here are some steps to follow:
Double-check your loan offer: some lenders adjust their rates automatically, while others don't. If yours hasn’t dropped the rate yet, call and ask (nicely, but firmly) if they plan to. This is where an experienced mortgage broker can help you.
Negotiate: falling rates are your leverage, so use it. Lenders want your business, and now’s the perfect time to ask for a better deal – or let them know you’ll walk.
Don’t rush a fixed rate just yet: if rates are falling, locking in now could mean committing to a higher rate than necessary.
Have you heard of rate lock?
The RBA has just announced a cash rate cut… so should you lock in your rate now? Let’s take a closer look.
What is a rate lock?
A rate lock is where your lender agrees to hold a specific interest rate for a set period – usually 90 days – during your home loan application process. That rate will then hold for the fixed rate period of your loan. This is usually one, three, or five years.
This protects you from further interest rate hikes during the first few years of your home loan. Think of it as insurance against your bank changing its mind and charging you more while you’re still filling out paperwork.
In volatile times or periods of uncertainty, this can be a comforting safety net. But, like all financial products, it’s only brilliant if you actually need it.
Be aware: rate lock is only available for fixed rate home loan applications. To know about about this, speak to your mortgage broker.
Why bother locking in?
Locking in your home loan rate can be a smart move, particularly if you want predictable repayments and not having to check the RBA updates with mild anxiety every other month. The upside looks like this:
Stability: when the cash rate is bouncing around like a kangaroo on espresso, locking in your rate gives you peace of mind that you’ll be able to service your loan, and the rate you planned around will be the one you get when you finally settle on your new property.
Budgeting ease: knowing your interest rate from the start of your home loan makes budgeting for your repayments easier. This is especially important if you’ve not had to manage a mortgage before. It’s ideal for:
first-home buyers
tight budgets
anyone who prefers “set and forget” over “check and sweat.”
Note: some people prefer certainty to perhaps missing out on a little drop.
Insurance against rising rates: if rates do start creeping up again, you’ll be smiling politely from the safe bubble of your fixed rate because your repayments won’t change during your fixed rate period.
Be aware: if you locked your rate at application and that rate stays the same during your fixed rate loan term, you will not benefit from any interest rate cuts, unless you refinance. This is a conversation to have with an experienced mortgage broker upfront, before you finalise your loan application.
But have you read the fine print?
Here’s what you should know:
You could miss out if rates drop: if rates go down after you lock in, there’s no refund or do-over.
Locks don’t last forever: they typically expire in 60–90 days, so if your loan doesn’t settle in time, you might need to re-lock it and it’s possible it could be at a higher rate or with an additional fee.
Speaking of fees: rate locks often come with a cost – sometimes a few hundred dollars, or a percentage of the loan. Not outrageous, but worth factoring in.
So, should you lock now or wait?
Now that the RBA has announced a cut, it's a good idea to speak with a mortgage broker about whether it's worth waiting for an even better rate – or not.
Feeling indecisive?
Consider a split loan. It’s the mortgage equivalent of hedging your bets. A split loan means part of your loan is fixed and part is variable. This way, you:
Lock in some peace of mind.
Keep flexibility with the rest.
Potentially win no matter what the RBA does next.
Be aware: you still need to meet two sets of rules and track two parts of your loan, so it’s not exactly a set-and-forget. Learn more about splitting home loans.
Quick tips for refinancing amid changing rates
Compare again: a rate change means the deals you were looking at last week may not be the best anymore.
Look at your fees: low rates are great, but not if they come with high setup or break costs.
Talk to a mortgage broker: A good broker – like my colleagues at Compare Club – can help you navigate shifting rates, compare options faster, and even negotiate on your behalf.
Review your budget: if your potential repayments go up or down by $100, $300, or more, what does that mean for your day-to-day living?
Bottom line
Interest rates are like the weather – unpredictable, sometimes annoying, and guaranteed to change when it’s least convenient. But refinancing in a fluctuating market doesn’t have to feel like gambling.
Talk to a mortgage broker who can look at your full picture – loan size, term, budget, and goals. The best decisions are always informed ones (and ideally, come with fewer surprise fees).
Whether you choose to float with the market or lock it down tight, knowing your options is half the battle. The other half? Having an expert in your corner, because in a market like this, saving money and sleeping soundly should go hand-in-hand.
Go deeper:
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
