The rate is only one part of the comparison
A lower interest rate is easy to compare because it is one number. The more important question is whether the new loan structure leaves you better off overall.
A refinance can reduce the interest rate and monthly repayment but still increase the total interest paid if the remaining loan term is stretched back out. Establishment costs, discharge fees, valuation costs, fixed-rate break costs and the loss or gain of useful loan features can also affect the outcome.
A useful comparison therefore starts with the existing loan as it stands today — current balance, current rate and remaining term — and then compares the proposed refinance on the same remaining term before looking at any longer-term alternative.
Questions worth asking before you refinance
A good refinance review should look beyond the advertised rate.
What happens if I keep the same remaining term?
This creates a like-for-like comparison and makes it easier to see the effect of the rate and costs.
Am I resetting the clock?
A lower monthly repayment caused mainly by extending the term may be useful for cash flow, but it is not the same thing as reducing the total cost.
What will it cost to switch?
Include discharge, application, valuation, settlement, package and any known fixed-rate break costs.
Could my existing lender reprice the loan?
Sometimes the first comparison should be between the current loan and a better offer from the existing lender before changing providers.
Which features matter?
Offset accounts, redraw, repayment flexibility, loan splits and future plans can matter as much as a small rate difference.