Why was my refinance declined when I've never missed a payment?

Because a refinance is a fresh application assessed on today's income, debts and living costs with a buffer added to the rate. Your repayment history with the old bank isn't the test.

What is an assessment buffer?

A margin the bank adds on top of your actual interest rate, generally 3%, to check you could still afford the loan if rates rose. It's the main reason people who are paying fine fail on paper.

What is a reduced buffer refinance?

A policy some banks run where they assess you at 1% above the rate instead of 3%, for borrowers with a clean 12 month history who aren't increasing the loan. Most are capped at 80% LVR.

Can I refinance if I'm over 80% LVR?

The reduced buffer paths mostly close above 80%, so you'd need to pass the standard test or wait for the value to lift. Repricing with your current bank is the usual first move.

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Straight Answers · Refinancing

I've never missed a repayment, so why won't the bank refinance me?

Bayley Clarke · Mortgage broker on the road · Last checked 3 September 2026 · 4 min read

The short answer

Because refinancing is a full income and borrowing capacity assessment, all over again. Just because you've got an existing home loan for a certain amount doesn't mean another bank will give you the same loan for the same amount.

The new bank goes back to the drawing board on income and debts, then adds a buffer on top of your interest rate, generally 3%, to prove you could still afford it if rates went up. A lot of people who are paying fine today fail that test on paper. The fix is the reduced buffer policies a lot of banks now run, if you fit their gates.

The two minute version. The rest of this page is the detail underneath it.

Refinancing is a new application, not a transfer

When we're looking at refinancing or switching banks, there is a full income assessment and borrowing capacity assessment done in order for you to qualify for a new loan with another lender. The new bank has never met you. Your five years of perfect repayments are with the old one.

So we've got to go back to the drawing board and have a look at income, any existing debts, and how the household spends. It's the same income versus outgoings equation you passed the first time, run on today's numbers.

The buffer is what fails you

The banks add their assessment buffer on top of your interest rate, which is generally 3%, to prove that if things happen and interest rates continue to go up, you can still afford the loan. If you're paying 6% today, the bank tests you at 9%.

That's why paying on time doesn't help. The test isn't whether you're paying the loan. It's whether you could pay it at 3% more, with today's income and today's living costs. Rates rose, living costs rose, and a loan that passed at 2% plus buffer can fail at 6% plus buffer without a single thing changing in your life.

The reduced buffer: the escape hatch

A lot of banks have brought out policies for exactly this. If you tick the criteria, which for most of them is a clear repayment history, a loan that's been open for at least 12 months, and we're not increasing the loan amount, they'll use what's called a reduced buffer. Instead of adding 3% to your interest rate, they add 1%.

The gates vary by bank and they matter. Nearly every 1% path is capped at 80% of the property's value. Most want owner-occupied, principal and interest, the same borrowers, and some cap your total debt against your income. One major pulled its reduced buffer path altogether in mid 2026, and a couple of non-bank lenders assess at 2% as their standard rather than 3%. So the answer to 'why won't the bank refinance me' is often 'that bank won't, this one will'.

The honest bit: the reduced buffer is a rate move, not a cash-out move

It exists to let you get a better rate on the loan you already have. Want to increase the loan, pull equity, or you're over 80%? The 1% paths mostly close, and you're back to the standard test.

If that's you, the honest conversation is repricing with your current bank first, then reassessing when the numbers move.

Knocked back on a refinance?

A 30 minute call. I'll run your numbers at both buffers, tell you which lenders have a reduced buffer path you fit, and what it's worth in dollars a year.

Book a 30 minute call Call 0437 189 939

No cost to you, ever. The bank pays me when a loan settles. · How I get paid

Next question

What's an LVR tier, and can I get revalued to drop into a lower one?

The 80% cap on the reduced buffer is an LVR question. Here's how tiers work.