Another interest rate rise is being priced in before the end of the year.

In fact, markets are implying a 100% chance of one further rate rise before year-end, with around a 30% chance of another in the first quarter of next year.

For mortgage holders, the obvious concern is higher repayments. But there’s another question worth asking:

Could waiting actually make it harder to refinance later?

Because when rates rise, the impact isn’t limited to what comes out of your bank account each month.

Your borrowing capacity can shrink too.

So, when should you refinance your home loan?

There’s no single answer that applies to everyone.

But if you’ve been thinking about refinancing, haven’t reviewed your loan recently, or you know there’s a better rate available elsewhere, it may be worth looking at your options before another rate rise changes your serviceability position. That’s the part many borrowers overlook.

A small rate rise can change more than your repayment

Let’s use a simple example.

 

Say you have a $500,000 principal-and-interest home loan over 30 years at 6%. Your repayments are around $2,998 a month.If your rate rises by 0.25 percentage points to 6.25%, repayments increase to around $3,079 a month.

 

That’s roughly:

$81 more each month
or
almost $1,000 more each year

 

But when you refinance, your actual repayment isn’t the only number a new lender looks at. They also test whether you could afford the loan at a higher assessment rate. So when interest rates rise, the hurdle you need to clear with a new lender can rise too.

Your income might be the same.
Your mortgage balance might be around the same.
But your ability to qualify with another lender could be different.

Ben highlights exactly this risk in the video: higher rates can reduce borrowing capacity and potentially stop a borrower from moving to a cheaper lender, even when they want to.

 

Don’t wait until a better loan is out of reach

This is where borrowers can find themselves in what’s sometimes called “mortgage prison”.

You can see a better rate elsewhere. You want to refinance. But you can no longer meet the new lender’s serviceability requirements. So the better loan exists — you just can’t access it.

That’s why the question of when to refinance your home loan matters. Sometimes the better time to review your options is before you need to. Ben’s message in the video is that borrowers considering refinancing may need to think about acting sooner rather than later if further rate rises reduce their ability to switch lenders.

 

Thinking about buying as well?

The same issue applies if you’re planning to:

• buy your first home;
• upgrade;
• or purchase an investment property.

Higher interest rates can reduce serviceability, which means the amount you can borrow today may not be the amount you can borrow later. So while it can be tempting to sit back and wait for more certainty, your borrowing position can keep moving while you wait.

And there’s another consideration. If inflation eventually stabilises and confidence improves, buyers who have been sitting on the sidelines may return to the market — potentially increasing competition. Ben points to that pent-up demand as another reason buyers should think carefully about simply delaying their plans.

 

The real question isn’t “Will rates rise?”

It’s:

What could another rate rise do to your options?

It could mean:

• higher repayments;
• lower borrowing capacity;
• fewer refinancing options;
• less flexibility with lenders;
• and a harder path to your next property move.

So rather than waiting until the next rate decision lands, it may be worth understanding where you stand now.

 

Review your home loan before your options narrow

If you’re wondering when to refinance your home loan, a good place to start is simply by reviewing it.

Ask:

• Is my current rate still competitive?
• Could refinancing improve my position?
• What would another rate rise do to my serviceability?
• Would I still qualify with another lender?
• Should I be considering fixed-rate options?

Ben’s recommendation is simple: speak with your mortgage broker and understand your position before making a decision.

And if you don’t currently have a broker, we would love to help.

We can review your existing loan, look at the options available and help you understand what another rate rise could mean for your position.

And as part of the Empower Wealth group, there’s also a broader team available across property, money management, financial planning and tax when you need it.

Don’t wait until your options narrow to find out what they were.