In November, the Reserve Bank of Australia (RBA) raised the cash rate again, taking it to 4.85% – its highest level since late 2008. It was the fifth increase of 2026, and for Melbourne homeowners already managing mortgages, another rate rise means more money going towards repayments.
Lenders typically respond quickly to RBA rate increases, so if you have a variable-rate mortgage, you could soon be paying more each month.
But while you have little control over the RBA and your lender, you do have options when it comes to your home loan. Whether that’s negotiating a new rate or refinancing elsewhere, there are ways to potentially reduce your interest costs and make your mortgage work more effectively.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
How much more are Melbourne mortgage holders paying?
For homeowners with mortgages, even a relatively small interest rate increase can have a noticeable impact on household finances.
Take a borrower with a $1 million mortgage, 25 years remaining and an interest rate that increases from 6.25% to 6.50%, assuming their lender passes on the latest 0.25 percentage point rise in full. Their monthly principal-and-interest repayment would rise by approximately $155, adding around $1,865 to their annual mortgage costs.
These figures are indicative only. Your actual repayments will depend on your loan balance, interest rate and remaining loan term.
And that’s just the impact of November’s increase. The cumulative effect of five rate rises this year is considerably greater.
Higher rates are also affecting borrowing capacity. Cotality estimated that the first four rate rises of 2026 had already reduced the borrowing capacity of a median-income household by approximately $90,000, or 9%. November's increase is likely to reduce borrowing capacity further, although the full impact has yet to be quantified.
That’s particularly relevant if you’re considering refinancing, because a new lender will assess your ability to service the loan at today's higher interest rates.
Despite these pressures, most borrowers are managing to keep up with repayments. The RBA’s October Financial Stability Review estimates that around 2% of variable-rate owner-occupier borrowers were experiencing a cash flow shortfall in the first half of 2026 – meaning their income wasn't sufficient to cover mortgage repayments and essential expenses.
Even if you’re comfortably meeting your repayments, paying more interest than necessary can add up to thousands of dollars over time.
That’s why reviewing your mortgage is important, particularly if you haven’t compared your loan with what’s currently available.
Should you refinance after the latest rate rise?
Refinancing is an option if your existing mortgage is no longer competitive or suitable for your circumstances. And borrowers are doing just that. According to the ABS, the number of owner-occupiers who refinanced their mortgage, both internally and externally, in the 2025/26 financial year was 113,016, up 11.1% from the previous financial year.
There are two options to consider.
External refinancing
External refinancing involves replacing your existing mortgage with a new loan from a different lender. You might qualify for a more favourable interest rate, different loan features or a structure better suited to your current needs.
For example, if you’re paying 6.75% on a $1 million mortgage and another lender offers 6.25%, that half-percentage-point difference represents approximately $5,000 in annual interest before allowing for changes in the outstanding balance.
However, external refinancing involves a new loan application and credit assessment. There may also be discharge fees, application costs and other expenses. Additionally, a lower advertised rate doesn’t automatically mean you’ll qualify for it.
Internal refinancing
Before moving elsewhere, you may want to check what your current lender is prepared to offer. Internal refinancing can involve negotiating a more favourable interest rate or switching to another loan product with the same lender.
This may be simpler than refinancing externally because you’re retaining the existing lending relationship. Depending on the change, you may avoid some of the costs and paperwork associated with moving lenders.
And lenders have a reason to negotiate: retaining an existing customer can be preferable to losing you to a competitor.
A mortgage broker like AXTON Finance can compare your existing rate against competing products and help you determine whether your lender’s retention offer is competitive.
If your lender won’t improve your deal sufficiently, you’ll have a clearer basis for considering alternatives.
Why the lowest advertised interest rate isn’t always the best deal
Interest rates are important, particularly when you’re carrying a large mortgage. But choosing a loan based only on its interest rate can end up being expensive if you overlook other features.
An offset account, for example, can reduce the interest charged on your mortgage by offsetting the balance against your outstanding loan. For a homeowner maintaining substantial savings, the interest saved through an offset account could outweigh a small difference in advertised rates.
Loan fees are another factor to consider. A product with a slightly lower rate may charge an annual package fee, while switching lenders could involve upfront costs.
Then there’s your loan structure. You may prefer the flexibility of a variable rate, the repayment certainty of a fixed rate or a combination of both.
Your future plans are also a factor. If you’re considering upgrading, purchasing an investment property or accessing equity for renovations, the right structure today could make those plans easier to manage later.
And if you expect to sell your property within the next year or two, the costs of refinancing may outweigh the savings.
The aim is to find a loan that works for your circumstances over time, including its total costs, features and flexibility.
What if refinancing isn’t an option right now?
Not everyone will be in a position to refinance, particularly if your income has changed, your borrowing capacity has fallen or your property value has declined. This might be the case as Melbourne’s housing market has softened, with Cotality reporting a 3.4% decline in dwelling values over the September quarter.
For borrowers with limited equity, that could affect your loan-to-value ratio and potentially the refinancing options available. However, there may still be ways to manage interest costs.
Negotiating with your current lender is one option. Reviewing how you’re using your offset account, making additional repayments where affordable or restructuring your existing lending may also help.
If you’re struggling to meet repayments, contacting your broker early to discuss hardship assistance is important.
Review your mortgage today
Nobody knows exactly where rates will go from here. What we do know is that you have options to make sure your current loan is still competitive, structured around your goals and not costing you more than it should.
At AXTON Finance, we work with a panel of more than 30 lenders. We can check whether your current lender will reprice your loan, compare that against what other lenders will offer and give you an honest view on whether switching makes sense once all the costs are counted.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
Haven’t reviewed your mortgage recently? Speak to the team at AXTON Finance to find out how your current loan compares. Call 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch today.
