The Highs and Lows of Current Interest Rates

You've locked in a rate, and now you're wondering if you've overpaid.

Rates shift constantly, and what seemed reasonable six months ago might feel high when you see a new headline or hear what someone else is paying. For first home buyers working with a smaller deposit, the question isn't just whether your rate is high, it's whether it's high enough to justify the effort and cost of changing it.

What Makes a Rate High Right Now

Your rate is high if it sits more than 0.30% above what similar borrowers are currently being offered for the same loan type and deposit size. That comparison needs to be specific. A borrower with a 10% deposit will always pay more than someone with 20%, and a variable rate will move differently to a fixed one. If you're comparing your rate to a headline figure without checking the deposit requirement, loan features, or whether it includes an offset account, you're not comparing the same product.

Consider a borrower who secured a variable rate 18 months ago at 6.20% with a 10% deposit. If current variable rates for that deposit level are sitting closer to 5.80%, that 0.40% gap is costing them around $80 to $100 per month on a $400,000 loan. That gap didn't appear because the lender increased the rate unfairly, it appeared because the market moved and the borrower's rate didn't move with it.

How Lenders Set Your Rate Based on Deposit Size

Lenders price risk, and deposit size is one of the clearest risk signals they use. A borrower with 5% down will pay a higher rate than someone with 20% because the lender is exposed to more potential loss if the property value drops or the borrower defaults. That rate difference usually sits between 0.20% and 0.50%, depending on the lender and the loan amount.

If you've bought with a smaller deposit through the Home Guarantee Scheme, you've avoided paying Lenders Mortgage Insurance, but your rate is still set based on the deposit you've contributed. Some lenders treat guarantee scheme loans the same as a 20% deposit for pricing purposes, others don't. That inconsistency is one reason why refinancing to a new lender can deliver a lower rate even if your deposit size hasn't changed.

Comparing Your Rate Without Getting Lost in the Numbers

You need three pieces of information to know if your rate is fair: your current rate, your deposit size as a percentage of the original purchase price, and the loan features you're actually using. Once you have those, you can look at what similar loans are being offered at today.

The comparison rate is meant to help with this, but it only works if you're comparing loans with the same term and borrowing amount. A loan advertised at 5.80% with a comparison rate of 6.10% might include a yearly fee that pushes the true cost higher. If your current loan has no ongoing fees and a rate of 6.00%, the advertised loan might not actually save you anything over the life of the loan.

In our experience, borrowers get stuck here because they're comparing advertised rates to their own rate without adjusting for fees, deposit size, or loan features. A broker can run that comparison in a few minutes using current pricing from multiple lenders, which is faster and more accurate than trying to reverse-engineer it yourself.

When the Gap Is Wide Enough to Justify Switching

A rate difference of 0.30% or more is usually worth investigating. Below that threshold, the cost of switching often outweighs the saving, especially if you're within the first few years of the loan and exit fees still apply.

Most lenders charge a discharge fee between $300 and $400 to close your loan, and the new lender may charge an application or settlement fee between $600 and $1,000. If you're switching from 6.20% to 5.90% on a $400,000 loan, you're saving roughly $1,200 per year. After covering $1,200 in upfront costs, you're breaking even in the first year and saving from that point forward.

If you're on a fixed rate and considering a switch, break costs can be significant. These are calculated based on the difference between your fixed rate and the current wholesale rate the lender can get for the remaining fixed period. If rates have dropped since you fixed, break costs could run into the thousands. If rates have risen, break costs might be zero or even result in a small credit. You won't know until the lender calculates it, and that figure can change week to week.

What First Home Buyers Often Miss About Rate Reductions

Many first home buyers assume that once they've secured a loan, the rate is locked in unless they actively refinance. That's not quite right. Lenders occasionally offer rate discounts to existing customers, particularly if you call and ask. Those discounts are rarely advertised, and they're not automatic.

If your lender won't move on the rate, refinancing to reduce your rate becomes the next option. The process involves a full application with a new lender, and they'll reassess your income, expenses, and deposit position as if you're applying fresh. If your financial position has improved since you first bought, such as a pay rise or reduced living costs, you might also qualify for a lower rate tier than you did originally.

One detail that catches people out: if your property value has increased since purchase, your loan-to-value ratio has improved, even if you haven't paid down much of the loan. A property bought for $500,000 with a $475,000 loan (5% deposit) that's now worth $530,000 has dropped from 95% LVR to around 90% LVR. That shift can open up lower rate options with some lenders, particularly if you're no longer in the highest risk bracket.

How to Approach This Without Overthinking It

If you've been in your loan for more than 12 months and you haven't checked your rate against the current market, it's worth a conversation. You don't need to have a full refinance plan in place before you ask the question, you just need to know whether the gap is wide enough to matter.

A mortgage broker can pull your current rate, check what you'd be offered today with your existing deposit and loan size, and give you a dollar figure for what switching would cost versus what it would save. That conversation takes about 20 minutes and gives you enough information to decide whether it's worth proceeding. If the numbers don't stack up, you've lost nothing. If they do, you're in a position to act.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers, show you what's available, and help you decide whether switching makes sense or whether you're already in a reasonable position.

Frequently Asked Questions