Why existing customers pay more than new ones
Lenders compete aggressively for new home loan business and regularly offer rates below their standard variable rate to attract borrowers switching from other banks. A borrower who refinanced to a new lender 18 months ago may already be paying more than someone who refinanced to that same lender today.
This pricing dynamic is sometimes called the loyalty tax. Lenders have little incentive to proactively reduce the rate of a customer who is making repayments, shows no signs of leaving, and has not made any inquiry about their rate. The ACCC noted in its home loan pricing inquiry that a persistent gap exists between advertised rates for new customers and the rates existing customers actually hold, and that gap tends to widen the longer a customer remains without review.
On a $600,000 loan, a 0.5% rate differential costs approximately $3,000 per year in additional interest. Over 3 years without review, that accumulates to $9,000 in interest a more attentive borrower might have avoided entirely, without changing lenders at all.
How often a home loan review actually makes sense
There is no single correct answer on frequency, but as a practical starting point, most mortgage brokers suggest reviewing your home loan every 12 to 18 months. This timeframe gives the competitive lending market enough space to shift materially, while avoiding the churn cost that comes from switching too frequently.
Calendar timing matters less than trigger events, however. Certain circumstances make a review valuable regardless of when you last checked: an RBA cash rate decision (particularly a cut), the end of a fixed-rate period, your LVR dropping below 80% as you pay down the loan, a meaningful increase in your income, or a significant change in your financial circumstances.
Fixed-rate expiry deserves specific attention. Borrowers who locked in a 2 or 3-year fixed rate in 2022 or 2023 at rates below 3% are rolling onto variable rates in the range of 6.0% to 6.5% as those terms end. A review before the fixed period expires, not after the rollover has already occurred, gives you the time and leverage to negotiate or refinance without urgency working against you.
What a proper review actually looks at
A home loan review is not the same as running a comparison on a rate website. A thorough review looks at the current rate you hold versus competitive rates in the market for your loan profile, the features you are actually using versus what you are paying for, whether your loan structure still suits your current circumstances, and whether your income and equity position have changed enough to unlock better products.
Many lenders will offer retention pricing to existing customers who signal they are considering switching. Calling your lender and requesting a rate review based on current market conditions often produces a discount without requiring a full refinance. This is worth trying first, before committing to the time and cost of an application elsewhere. A lender that brings your rate down without a switching cost is a good outcome. If they decline or the improvement is small, you then have a clearer basis for comparing alternatives.
When refinancing costs outweigh the rate saving
Switching lenders carries costs: a discharge fee from the outgoing lender (typically $150 to $350), an application or settlement fee at the new lender, conveyancing fees, and potentially lenders mortgage insurance if your LVR is above 80%. The process also requires time to gather documentation and complete a new application.
For a rate saving of 0.4% per annum on a $500,000 loan, the annual interest saving is $2,000. If total switching costs come to $2,500, the break-even point is approximately 15 months. If you plan to sell within that window, refinancing at that saving produces a net loss. If you expect to hold the property for another 5 years, the cumulative interest saving is $10,000 against a $2,500 switching cost, which is a clear net benefit.
A common question here: Is it worth refinancing for a saving of less than 0.3%? On a smaller loan or with a shorter holding horizon, possibly not. The break-even calculation changes with loan size, so running the specific numbers for your balance is a more reliable guide than any general threshold.
What a mortgage broker can do that a comparison site cannot
Rate comparison websites show advertised rates from lenders who pay to appear there. They do not reflect every lender, do not account for what a specific applicant would actually be offered based on their income, LVR, and loan purpose, and do not factor in loan structure or features beyond the rate itself.
A mortgage broker accesses a panel of lenders and can submit your actual financial position to identify what you would realistically be approved for, at what rate, and on what terms. The service is typically at no cost to the borrower, as brokers receive a commission from the lender on settlement. Understanding how your broker is compensated is a reasonable question to raise before proceeding, and reputable brokers will explain their remuneration structure clearly without prompting.
The value of a broker review is not just the rate comparison. It also includes a check of whether your current loan structure, features, and repayment type still match where you are now, which is a more complete picture of whether your loan is still working for you.
