It's up to you @Daniela2458 as to whether you chose to provide more of a refund than the guest is entitled to.
why did they want to cancel?
In most cases. I would tell the guest that any cancellation would need to be processed under the policy they booked under - and that if they wanted a full refund they could have cancelled a couple of hours earlier .
So far did the guest expect you to go would they have argued the same if it was seven, ten or twelve hours outside of the cut off point?
I have had a strict cancellation policy since I started eight years ago and have only once been asked to voluntarily refund a booking when the guest wanted to cancel.
I always suggest if a guest has to cancel unexpectedly they look to claim on their travel insurance.
you can offer to refund if you get a replacement booking (of the host fee).