You can make every repayment on time for years and still be told you can’t afford the same loan with a different lender. That is the serviceability trap, and it is catching more borrowers as rates climb. The MFAA’s August 2026 Market Sentiment Survey found 49.2% of brokers had more clients unable to refinance because of serviceability, more than double the 24.4% recorded six months earlier. If refinancing looks blocked for you, several routes are still worth understanding before you accept the rate you are on.
Why serviceability can stop you refinancing
Serviceability is a lender’s test of whether your income can cover the new loan, your other debts and your living costs. APRA expects lenders to assess new loans at least 3.0 percentage points above the actual interest rate. On a variable rate of 6.3%, your repayments are tested as if the rate were around 9.3%.
A new lender treats a refinance as a fresh application. Your clean repayment record helps, but it does not replace the calculation. A borrower who took out a loan when rates were two points lower, and borrowed close to their limit, could have passed comfortably back then and fail today on exactly the same income.
Each cash rate rise widens that gap. The cash rate sits at 4.60% after four increases this year, and Cotality estimates those rises have cut median borrowing capacity by almost $90,000. On a $650,000 loan over 30 years, repayments at 6.3% are about $4,023 a month, while the tested repayment at 9.3% is about $5,371.
What else is making refinancing harder in 2026
Income changes are the next most common blocker. Redundancy, reduced hours, a move from salary into self-employment or a stretch of parental leave all change the number a lender works from. The lender assesses your income as it stands on the day you apply.
Falling property values add a second layer. Cotality’s Home Value Index shows national values fell for a sixth straight month in September and now sit 5.2% below the March peak. If a new valuation pushes your LVR (loan-to-value ratio, your loan as a share of the property’s value) above 80%, a new lender will usually charge lenders mortgage insurance, which can wipe out the savings from switching. Equifax data shows switching to a new lender fell 8.8% year on year in September.
Refinance options when you fail the standard buffer
Failing the 3.0% buffer at one lender does not mean every door is closed. Lender policies differ, and some have specific pathways for borrowers who are already paying a similar loan.
What is a like-for-like refinance policy?
Since 2023, some lenders have offered streamlined refinance policies that assess eligible borrowers at a lower buffer, often around 1.0%. These usually require the loan amount to stay the same or reduce, the new repayments to be lower than your current ones, and a clean recent repayment history. Many exclude debt consolidation and cash out, so adding a car loan or renovation funds to the refinance can knock you out of the policy.
APRA treats these as exceptions to standard policy that lenders manage case by case, which means criteria and availability vary and can change. Non-bank and specialist lenders may also use different serviceability calculations, though usually at higher rates. Moving to a higher rate simply to escape your current lender rarely makes financial sense.
When staying with your current lender may be the better move
Your existing lender can reprice your loan without reassessing serviceability. A rate review request costs nothing, and retention teams have been offering larger discounts as refinancing volumes fall. Cutting the rate from 6.3% to 6.0% on a $650,000 loan lowers repayments by about $126 a month, or roughly $1,500 a year.
If the gap between your rate and the best available rate is only a few basis points, a negotiated discount plus extra repayments or a well-used offset account may deliver a similar result to switching. Paying the balance down also improves your LVR and puts you in a stronger position to refinance later.
How to improve your chances of refinancing later
Small changes to your file can shift the serviceability result. Lenders typically count a set percentage of every credit card limit as a monthly commitment, whether or not you carry a balance, so reducing or closing unused cards can help. Clearing a car loan, closing buy now pay later accounts and keeping three months of tidy bank statements also make a difference.
If your income has recently changed, many lenders look for a period of stable employment in a new role before they will assess it in full. Timing an application after that period may open up more options. At JRW Finance, we compare refinance policies across lenders so you can see which pathways exist for your situation before you apply anywhere. You can read more about how we approach refinancing.
Key Takeaways
- Lenders test a refinance at least 3.0 percentage points above the actual rate, so a loan you pay comfortably can still fail a new lender’s serviceability test.
- Rising rates, income changes and falling property values are the main reasons borrowers are getting stuck with their current lender in 2026.
- Some lenders offer like-for-like refinance policies with a buffer of around 1.0%, but these usually exclude cash out and debt consolidation.
- Your current lender can reprice your loan without a new serviceability test, so a rate review is often the first step worth taking.
- Reducing credit card limits and clearing small debts can improve your serviceability result before a future refinance.