Why so many borrowers are still stretched — and how to find your safe limit in 2025
If you’ve got a mortgage, you’ve probably felt the recent rate reductions — a little breathing room in your monthly budget, a sigh of relief as repayments dip slightly.
But that sense of relief hasn’t lasted long. Across Australia, stress levels are climbing again — even as the cost of borrowing falls.
It’s a strange contradiction: lower rates, but higher pressure.
According to Roy Morgan, in the three months to June 2025, 28.4% of mortgage holders — around 1.5 million Australians — are now considered “at risk” of mortgage stress. That’s up 1.5 percentage points in a single month. The number classed as “extremely at risk” remains above one million — far higher than the long-term average of 14.8%.
So, what’s going on?
The paradox behind ‘rate relief’
On paper, borrowers should be feeling better. The Reserve Bank’s recent cuts have eased the cash rate, and most major lenders have now trimmed variable mortgage rates.
But in practice, many households are more stretched than ever. Why? Because they’re borrowing more, stretching harder, and absorbing higher living costs that erase much of the benefit.
In fact, average new loan sizes have risen steadily over 2024-25 — particularly in capital cities where competition for limited housing stock remains fierce. CoreLogic data shows that while rates have eased, national home values are still up more than 7% year-on-year, pushing many buyers to the upper edge of their borrowing power.
At the same time, refinancing activity has surged. PEXA reports a 12.5% annual increase in refinances, while money.com.au notes that over 585,000 home loans were refinanced in the past year — almost back to the record levels of 2023.
For many households, the goal is simple: claw back every dollar possible in repayments. But what we’re seeing on the front lines tells a deeper story — one about stress, structure, and smart limits.
What we’re seeing on the front lines
At Trilogy, we work with hundreds of borrowers each month — and lately, a clear pattern has emerged.
We call it the Borrower’s Tightrope: the fine line between maximising opportunity and minimising risk.
Right now, three forces are pulling borrowers in opposite directions:
| Force | What it looks like | The risk behind it |
| 1. Stretching to compete | Buyers are pushing to secure properties before prices climb further. Many are borrowing at (or just beyond) their comfort limit. | The extra $50–$100k in loan size might win the property — but it can erase financial breathing room if costs rise again. |
| 2. Refinancing to survive | Existing borrowers are restructuring loans, hunting sharper rates or resetting terms to ease cash flow. | Not all refinancing saves money. Some extend loan terms, increasing total interest paid — and delaying real progress. |
| 3. Uneven relief | Higher-income households feel the benefit of rate cuts first; lower-income and first-home buyers are still squeezed. | Mortgage stress is most acute among borrowers with minimal buffers, high LVRs, or fixed loans rolling off. |
We’re seeing it every day: even small shifts in income, interest, or expenses can push households from “comfortable” to “concerning.”
The good news? With the right structure and a realistic understanding of your limits, you can stay on the safe side of that tightrope.
Discomfort vs danger: knowing your boundaries
A little discomfort is normal — even healthy — when you’re investing in a home or building wealth. But there’s a difference between stretching strategically and pushing too far.
We believe smart borrowing is like resistance training: the goal isn’t to avoid effort, it’s to work within limits that make you stronger over time.
When we run borrowing assessments for clients, we always explore two sides of the equation:
- What the banks will lend you, and
- What your life can actually support.
Those aren’t always the same number.
A few examples we’ve seen lately:
- Clients pre-approved for $950,000 who choose to borrow $850,000 instead — keeping repayments comfortable even if rates rise again.
- Households restructuring loans to reduce term, not extend it — shaving years off repayment timelines.
- Investors accessing equity, but keeping 3–6 months of repayments aside in an offset, just in case.
These aren’t just financial strategies — they’re safety strategies.
Because the truth is, we can get most clients the amount they want to borrow. The real question is whether they’ll want the repayments six months later.
How to find your ‘smart limit’
If you’re buying or refinancing right now, here’s how to build safety into your decision:
- Start with a “stress-tested” repayment
Work out your loan affordability if rates rose another 0.75%. If it still fits comfortably, you’re within a smart zone. - Compare by total cost, not just rate
Lower rates can hide longer loan terms or fewer features. Check the lifetime interest cost, not just the monthly figure. - Keep some buffer — even $5k-$10k helps
A small offset or redraw balance can turn emergencies into mild inconveniences. - Revisit your structure annually
Lenders change policy often. Refinancing might unlock better options — but not if you wait until cash flow is tight. - Ask questions early
The best time to fix a loan structure is before it breaks. Whether it’s releasing equity, splitting fixed/variable, or adjusting repayments, do it before you need to.
The takeaway: strength over stretch
The rate relief many Australians are feeling right now is real — but fragile.
Mortgage stress is up because our financial behaviour hasn’t fully adjusted to the new normal. Bigger loans, tighter budgets, and rising expectations are eroding the benefit of lower rates.
At Trilogy, we help our clients walk that fine line. We’ll fight to get you the best possible deal — and the highest loan your circumstances allow — but we’ll also make sure you can live with it, not just get it.
Because borrowing power means nothing if it breaks your budget.
Book a free 30-minute finance strategy session — to find out what your smart limit is.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).