Rate-and-Term Refinance Australia 2025: Should You Refinance Your Home Loan?

Is your home loan working as hard as you are? With Australia’s financial landscape evolving in 2025, more homeowners are weighing up the benefits of rate-and-term refinance. But is it the right move for you?

What is Rate-and-Term Refinance?

Rate-and-term refinancing involves replacing your existing mortgage with a new one that has different terms—typically a new interest rate, a new loan length, or both. Unlike a cash-out refinance, you’re not borrowing extra money against your equity; the focus is on optimising your loan conditions to save on interest or adjust repayments.

For example, if you locked in a fixed rate at 5.5% in 2022 and today’s variable rates have dropped to 4.9%, refinancing could mean significant savings. Alternatively, you might want to switch from a 25-year loan to a 20-year term to pay off your home sooner.

2025 Policy Updates: What’s New?

The lending environment in Australia has shifted markedly in 2025. Here’s what’s shaping the refinance landscape:

• APRA’s Serviceability Buffer Relaxed: The Australian Prudential Regulation Authority (APRA) eased serviceability buffers for refinancers in late 2024, lowering the minimum assessment rate from 3% to 2.5% above the loan rate. This makes it easier for borrowers with strong repayment histories to qualify for a better deal.
• Green Loan Incentives: Lenders are offering rate discounts for borrowers refinancing into ‘green’ home loans—those who commit to energy-efficient upgrades. Some banks offer up to 0.2% off standard rates for eligible properties.
• Streamlined Digital Approvals: Major banks and neobanks now provide near-instant digital approvals for straightforward refinances, reducing paperwork and stress for borrowers.

When Does Rate-and-Term Refinance Make Sense?

Not every homeowner benefits from refinancing, but it can be a smart move if:

• You’re on a higher fixed rate and current rates are lower.
• Your financial situation has improved, allowing you to switch to a shorter loan term and save on interest.
• You want to move from a variable to a fixed rate (or vice versa) to better manage your risk in a changing market.
• You want to remove a guarantor or co-borrower from your loan agreement.

Case in point: Ella and Tom, a couple in Sydney, refinanced from a 5.6% fixed rate to a 4.7% variable in March 2025. Their repayments dropped by $230 per month, and they shaved two years off their loan by switching to a 20-year term.

What Should You Watch Out For?

• Break Costs: If you’re leaving a fixed-rate loan early, the lender may charge a ‘break fee’. Ask for a quote before applying.
• Application & Valuation Fees: New lenders often charge setup fees, though many waive these for refinancers as a promotional sweetener in 2025.
• Loan Features: Check if the new loan has redraw or offset facilities if you use these features in your current mortgage.
• Comparison Rate: Don’t be seduced by headline rates alone. The comparison rate reflects the true cost, including most fees and charges.

How to Get the Best Out of Your Refinance in 2025

1. Review Your Goals: Are you looking to lower repayments, pay off your loan faster, or gain flexibility?
2. Compare Lenders: Use reputable comparison sites and check direct lender offers for special refinance deals.
3. Prepare Documentation: Have payslips, bank statements, and loan details ready for a smooth approval process.
4. Negotiate: Don’t be afraid to ask your current lender to match a competitor’s offer—they may surprise you!