Refinancing in 2026: Why It Could Save You Thousands

The Reserve Bank of Australia has cut rates in 2025, and forecasts suggest they could drop to around 5.0% by late 2026. That means if you’re stuck on a rate above 6%, you could be paying thousands more than you need to. 

Refinancing your home loan in 2026 could slash your monthly repayments and free up cash for the things that matter – whether that’s paying off debt faster, building savings, or simply breathing easier each month.

Key Insights

• Average savings potential: Up to $7,476 per year by switching from a 6.44% rate to 4.99%
• Who benefits most: Borrowers with variable rates above 6%, or those with equity above 20%
• Timing: With rates forecast to fall through 2026, now’s the time to review your options
• Watch out for: Closing costs (typically $350-$500 discharge fee plus application fees) and lender’s mortgage insurance if your equity is below 20%

Why Refinancing Your Home Loan Makes Sense in 2026

Australian mortgage rates are on a downward trajectory. After reaching a 13-year high of 4.35% in late 2024, the RBA cash rate now sits at 3.85%, with major banks forecasting it could fall to 3.35% by late 2026. That translates to variable home loan rates around 5.0% by year’s end.

Here’s what that means for you: if you’re currently paying 6.5% on a $500,000 loan, dropping to 5.5% could save you around $350 per month or $4,200 a year. Over the remaining life of a 25-year loan, you’re looking at tens of thousands in interest savings.

And it’s not just about the rate. Refinancing lets you access features your current loan might not have, like offset accounts that reduce the interest you pay, or redraw facilities that give you flexibility with extra repayments. Some borrowers refinance to consolidate debt, tap into equity for renovations, or switch from a 30-year term to a 15-year term to become mortgage-free faster.

How Much Could You Save?

Let’s look at real numbers. According to the ABS, the average Australian home loan is now $678,010. If you’re paying the current average variable rate of 6.44% and you refinance to a competitive rate of 5.49%, your monthly repayments drop from $4,259 to $3,845. That’s $414 a month back in your pocket, or nearly $5,000 a year.

But here’s the thing – not everyone will save the same amount. Your savings depend on your current rate, loan size, and how long you plan to keep the new loan. A mortgage broker can run the numbers for your specific situation and show you exactly where you stand.

The key is the break-even point. If refinancing costs you $2,000 in fees and saves you $400 a month, you’ll break even in five months. After that, it’s pure savings. Most people who refinance in 2026 will hit their break-even point within 6-12 months, making it a no-brainer for anyone planning to stay in their home long-term.

Key Considerations Before You Refinance

Before you jump in, there are a few things to watch out for. 

1. Check your equity position

If your loan is more than 80% of your property’s value, you’ll likely need to pay lenders’ mortgage insurance (LMI) again – and that could wipe out any rate savings. You need at least 20% equity to avoid this cost.

2. Factor in all the fees

You’ll typically pay a discharge fee to your current lender ($350-$500), plus application and valuation fees with your new lender. Some lenders offer cashback deals or will waive certain fees to win your business, so it pays to shop around.

3. Don’t restart the clock on your loan term

If you’ve already paid five years on a 30-year loan, make sure your new loan term is 25 years or less, not another 30 years. Extending your term might lower your monthly payment, but you’ll pay significantly more interest over the long term.

4. Check for break fees before refinancing

This is for those whose current loan is at a fixed rate. Depending on how much time is left on your fixed term, these fees can be substantial. For most borrowers on variable rates, though, there’s no penalty to switch.

This is where expert advice makes all the difference. A qualified financial advisor can assess whether refinancing your home loan aligns with your broader financial goals, not just your mortgage payments.

Make Your Move in 2026

With interest rates trending downward and potential savings in the thousands, 2026 is shaping up to be one of the best years to refinance. The RBA’s rate cuts are flowing through to lenders, and competition for borrowers is heating up, which means better deals for you.

Want to know exactly how much you could save? Inovayt’s mortgage brokers and financial advisers can compare rates from over 40 lenders, calculate your break-even point, and handle the entire refinancing process for you. Get in touch today and find out if refinancing your home loan could save you thousands in 2026.