Parents want to refinance for a higher interest rate

My parents want to do a cash out refinance on the home.

They got the home in 2021. Current loan is $500k with a $3.3k mortgage total monthly. Interest is 2.75%.

The new loan is $725k with a $4.9k total monthly at 5.25%. Cash to close is $160k and closing costs is $54k.

My parents are hoping to cash out before housing prices/interest rates go back down and they can’t cash in on the price of the home. Is this a smart decision or bad, and is there other options available?