Should You Refinance With Your Existing Bank or Switch Lenders?

Key Takeaways

• Your rate can sit above new-customer offers because lenders price fresh business more keenly, and the gap widens the longer you hold the loan.
• Asking your existing lender to reprice is fast, low-cost and keeps your loan intact, but retention offers rarely match a lender’s sharpest new-customer pricing.
• Switching reaches the wider market and can change your loan’s features or structure, but only pays once the saving clears discharge, break, setup, government and LMI costs.
• A new lender must assess you at your rate plus 3 percentage points, so some borrowers who comfortably service their loan still cannot pass the test to switch.

You open the banking app and see the rate your lender advertises to new customers sitting below your own. Whether to refinance with your existing bank or switch lenders comes down to more than that gap. Both paths can lower what you pay, but they work differently, cost different amounts and suit different situations.

The choice is rarely about the headline rate alone. It turns on how far your rate has drifted, what moving would cost, whether a new lender would approve you, and what you need the loan to do over the next few years. Where the numbers sit close together, sitting down to refinance with a broker who can model both paths tends to clear things up quickly.

Why New Borrowers Are Offered Sharper Rates Than You

Your rate can drift above what a new customer is offered because lenders price fresh business more keenly than the loans already on their books. How the gap opens, and how wide it grows, sets how hard to push and which path is worth the effort:

Pricing Aimed at New Business

A lender competes hardest for the borrower deciding today and has little reason to keep improving the rate of someone who has already settled. Your loan is not repriced when the market moves, so your rate can hold steady while new-customer offers fall.

Loyalty Gap That Grows Over Time

Older variable-rate loans can sit above new-customer offers, and the longer a loan is held without a review, the wider that gap tends to grow. Its size depends on your lender, your loan and how far pricing has moved since you settled, so two borrowers with the same balance can be overpaying by very different amounts. This is the loyalty tax, and it costs long-held borrowers the most.

Revert Rate After a Fixed Period

When a fixed term ends, the loan usually rolls to the lender’s revert rate, often higher than both your old fixed rate and current new-customer offers. Many borrowers notice only months later, after paying more without a prompt to review.

Equity Gains Your Rate Overlooks

Paying down the loan or a rise in your property value lowers your loan-to-value ratio (LVR), your debt measured against the home’s value. A lower LVR can qualify you for sharper pricing, yet your rate does not adjust on its own. That improved position sits unused until you ask or move.

What You Gain by Staying and Renegotiating

Staying put lets you lower your rate without changing lenders, and without the time or cost a full switch involves. A repricing request is usually the first move worth trying:

Repricing Request to Your Lender

Asking your lender to review your rate is a standard request, not a favour. Most lenders have retention teams able to apply discounts that are not advertised, and a short call or written request can prompt a lower rate within days. You keep your existing loan, account number, features and repayment history.

Bargaining Room From a Rival Offer

Your position is stronger when you can point to a specific offer elsewhere. A written quote from another lender, or a genuine move to discharge the loan, signals you are willing to leave, which can shift a retention team from a token reduction to a meaningful one. The signal has to be credible, so it helps to know what you would qualify for before raising it.

Speed and Low Cost of Staying

Repricing avoids the costs of switching entirely. There is no discharge, no new application, no valuation and no fresh assessment, so the change can be settled quickly and at little or no cost.

Ceiling on a Retention Offer

Lenders rarely match their own sharpest new-customer pricing for an existing borrower, so a repricing may narrow the gap without closing it. Where the reduction leaves you above the wider market, or you need something the loan cannot do, staying is only a partial fix.

What Switching Lenders Opens Up

Moving to a new lender puts the whole market within reach, not just what your bank will concede. It also means a fresh application and assessment, so the upside has to be worth it:

Access to New-Customer Pricing

A switch makes you a new customer, where the keenest pricing sits. Instead of negotiating against a single lender’s retention limit, you compare offers across the market and move to the one that fits. For a borrower carrying a wide loyalty gap, this is often where the largest saving comes from.

Features Beyond a Repricing

Some changes are only possible by moving. An offset account, a split between fixed and variable, a different repayment type, or a structure built around a trust or self-managed super fund (SMSF) may not be available on your current product. Switching lets you match the loan to how you use it, not only to a lower number.

Cashback and Fee Waivers on Offer

Lenders sometimes add incentives to win a switch, such as cashback or waived setup fees. These can offset part of the cost of moving, though they change often and vary by lender, and a large incentive attached to a higher ongoing rate can cost more over time than it returns upfront. Treat any incentive as one figure in the sum, not the reason to move.

Restructure for a Growing Portfolio

Switching can do more than cut a rate. Releasing equity for a deposit, separating owner-occupier and investment debt, or consolidating other debts into the loan are structural changes a move can carry, which matters most for self-employed borrowers, trusts and investors holding several properties. In those cases, the reason to switch may be the structure, with the rate a secondary gain.

Costs That Decide Whether Switching Pays

Switching only pays once the savings clear what it costs to leave one loan and set up another. Those costs are specific, so the decision comes down to a short list of figures you can add up in advance:

Discharge Fee

Your current lender may charge a discharge or settlement fee to close the loan and release the mortgage. It is typically a few hundred dollars, though the exact amount depends on the lender and loan type.

Break Costs

A fixed-rate loan can carry a break cost if you leave before the term ends. This is not a set fee; it depends on how rates have moved since you fixed and how long remains, and in some cases it can run into thousands of dollars. On a variable loan, there is usually no break cost.

Setup Fees

The new lender may charge application, settlement or valuation fees to establish the loan. Some waive these to win the switch, so the amount depends on the offer in front of you.

Government Registration Fees

State charges apply to discharge the old mortgage and register the new one. These are set by your state or territory, so they vary by location and are not something a lender can waive.

Lenders Mortgage Insurance

Where your loan is above 80% of the property value, a new lender may require lenders mortgage insurance (LMI) again, even if you paid it on the original loan, because it does not transfer between lenders. Staying at or under 80% LVR usually avoids this and widens your choice of lender.

These amounts are a general guide only and vary by lender, loan type and location. What decides the move is the total cost set against your expected saving, not any single fee. You can test that total with our refinance calculator.

What Could Stop You From Switching

A switch depends on passing a new lender’s assessment. Some borrowers who meet their current repayments without trouble still fall short of that test, so it pays to know what it looks at before you apply:

Serviceability Buffer on a New Loan

Every regulated lender must test you at more than the actual rate. The Australian Prudential Regulation Authority (APRA) requires lenders to assess your capacity at your loan rate plus 3 percentage points, so a loan advertised near 6% is assessed closer to 9%. The buffer has stayed at 3 percentage points through 2026, despite industry calls to lower it, and it reduces the amount a new lender may approve.

Mortgage Prison From Tighter Tests

The buffer can trap borrowers who are servicing their loan comfortably. Someone who borrowed when rates were very low may no longer pass the current test at a new lender, even with a clean repayment record, which leaves them stuck on their existing loan. This is often called being a mortgage prisoner, and it is the main reason a switch that looks obvious on rate can still fail.

Exceptions for a Like-for-Like Switch

There are limited ways around the buffer. Under APRA’s case-by-case exception guidance, some lenders may apply a reduced buffer to a like-for-like switch, where you are not increasing the loan and have a solid repayment history, and lenders that are not authorised deposit-taking institutions (ADIs) are not bound by the 3 percentage point buffer at all. These paths carry strict eligibility and are not offered to everyone, so treat them as a possibility to check, not a certainty.

Equity and LVR Behind Your Options

How much equity you hold shapes what a new lender will offer. Sitting at or below 80% LVR generally widens your choice of lender and avoids fresh LMI, while a higher LVR narrows options and can add cost. A property that has fallen in value since you borrowed can push your LVR higher than you expect and limit a switch.

Income or Ownership That Complicates Approval

Self-employed income, loans held in a trust or SMSF, or a portfolio across several properties are assessed differently from lender to lender, so the same file may be declined by one and approved by another. The question becomes less whether you can switch and more which lender fits the structure, which is where comparing across a panel earns its place.

How to Decide Between Staying and Switching

No single factor settles it, and weighing them in a set order stops you moving when a phone call would have done, or negotiating when a clean move was the stronger play:

Size of Your Rate Gap

How far your rate sits above current offers is the first thing to establish. A small gap may be closed with a repricing request and not worth a switch, while a wide gap, common on older loans, can justify the move.

Break-Even on Switching Costs

A saving only counts once it clears the cost of moving. Add up the switching costs, then work out how many months of lower repayments it takes to recover them. If a switch costs around $1,000 all up and drops your repayments by $150 a month, you recover the cost in about seven months; a break-even that far inside the time you expect to hold the loan points to switching, while a long one points to staying and negotiating.

Features and Structure You Need Next

Where you need an offset, a split, equity release or a structure your current lender cannot provide, a switch can be worth it even at a similar rate. Match the decision to what you need the loan to do over the coming years, not only today’s repayment.

Odds of Passing a New Test

Be honest about whether a new lender would approve you. Where your income, LVR or circumstances make the serviceability test borderline, negotiating with your current lender is the safer first move, since it carries no assessment and no declined application on your file. Where timing also matters, our guide on when to refinance can help you judge the moment.

Order to Try the Two Paths

For many borrowers, asking first and moving second is the sensible order. A repricing request costs little and can deliver a quick reduction, and if the offer hits its ceiling or you need features it cannot provide, switching remains open. Going to the market first makes sense only when you already know the gap is wide and your file is strong enough to approve.

Confidence You Are Not Overpaying to Stay

The gap you noticed on the banking app has a fix, and it is usually one of two moves rather than a leap in the dark. Knowing your rate, your equity and whether a new lender would take you turns a vague sense of overpaying into a decision you can act on.

Most borrowers who suspect they are paying too much are right, and the difference is made by trying the moves in the right order. If you are weighing whether to renegotiate or move your loan, the brokers at Unconditional Finance can talk you through the numbers that suit your circumstances.

Frequently Asked Questions (FAQs)

1. How long does it take to switch home loan lenders?

A switch typically settles within around four to six weeks, depending on the lender, how quickly a valuation is completed and how complex your file is. A straightforward owner-occupier refinance tends to be at the faster end, while self-employed income or multiple properties can add time. Your current lender also needs to process the discharge, which affects the timing.

2. Can I switch lenders while I’m on a fixed rate?

You can, but a fixed loan may carry a break cost if you leave before the term ends. That cost depends on how rates have moved since you fixed and how long remains, and in some cases it can outweigh the saving from switching. Work out the break cost before deciding, as leaving a fixed loan early is not always cheaper.

3. Is repricing with my bank different from refinancing?

Yes. Repricing means your existing lender lowers the rate on your current loan, with no new application and no change to the loan itself. Refinancing means taking out a new loan, either with your current lender or another one, which involves a fresh assessment.

Repricing is faster and cheaper, while refinancing can reach a wider set of rates and features.

4. Will applying to refinance affect my credit score?

A refinance application usually records a credit enquiry, which can have a small, short-term effect on your credit score. One application is generally minor, but several applications to different lenders in a short period can weigh more heavily. This is one reason to compare options first and apply once, to the lender most likely to approve you.

5. What happens if my property has fallen in value?

It raises your LVR, and above 80% that can trigger LMI on the new loan or narrow your choice of lender. Where the fall pushes you well above that threshold, a switch may cost more than it saves, so negotiating with your current lender could be the better first step. A current valuation shows where you stand before you apply.

6. Does using a broker to refinance cost me anything?

In most cases, a mortgage broker is paid by the lender you settle with, so there is usually no direct cost to you for the service. A broker can compare lenders across a panel, check which are likely to approve your file, and handle the application and discharge. Where a fee does apply, it should be disclosed to you upfront before any work begins.

This article is general information only and does not take your objectives, financial situation or needs into account. You may wish to speak with a licensed mortgage professional before acting on anything set out here.