Inflation has fallen below 3%, setting the stage for potential RBA rate cuts. While 1.45 million Australians still face mortgage stress, the changing economic landscape offers new opportunities in refinancing, SMSF property investment, bridging finance, and debt consolidation. Now is the ideal time to review your mortgage strategy.
The economic tide is finally turning for Australian borrowers. With inflation easing below 3% for the first time in two years and the Reserve Bank of Australia (RBA) hinting at rate cuts, May 2025 could mark a pivotal moment for homeowners and investors alike. After an extended period of high interest rates, it’s time to reassess your mortgage strategy and position yourself for the changing financial landscape.
Current Economic Climate: A Shifting Landscape
Recent data reveals that Australia’s core inflation, measured by the RBA’s preferred trimmed mean, has fallen to 2.9%—finally within the central bank’s 2–3% target range for the first time since late 2021. Headline inflation remains steady at 2.4% annually. These figures strengthen expectations for potential interest rate cuts in the coming months.
However, despite this positive outlook, many Australians continue to grapple with financial pressure. As of March 2025, approximately 1.45 million mortgage holders are still considered “at risk,” with 990,000 classified as “extremely at risk.” While these numbers represent a modest decline following the RBA’s February adjustments, they highlight the ongoing strain on household budgets.
What This Means for Different Borrowers
For Existing Homeowners
If you’ve been feeling trapped in “mortgage prison” due to tightened lending standards and property valuation drops, the climate is changing. With inflation under control and potential rate cuts on the horizon, lenders may start easing their assessment criteria. This could open refinancing opportunities that weren’t available during the high-rate environment.
For Property Investors
The investment landscape is showing early signs of activity. National Australia Bank (NAB) reported that demand for financed vehicles and equipment rose about 10% nationally in 2023 despite higher rates, indicating growing business confidence. This economic resilience may translate to increased stability in the property investment market as well.
For Self-Managed Super Fund (SMSF) Investors
SMSFs continue to represent a significant avenue for property investment. According to the ATO, SMSFs held substantial cash investments as of late 2024, indicating strong positioning to capitalize on property opportunities. However, be aware of proposed regulatory changes, including the potential Division 296 tax on superannuation balances exceeding $3 million (scheduled for July 2025).
Strategic Options to Consider This May
1. Refinancing Smarter, Not Harder
With economic indicators improving, May 2025 presents an opportune moment to review your mortgage. You may now qualify for better terms than 12 months ago, even if you were previously rejected for refinancing. Banks are also competing more aggressively for quality borrowers as their lending appetite returns. Explore your options with Sanford Finance’s refinancing services.
2. Reassessing Fixed vs. Variable Loans
The fixed-rate mortgage cliff that dominated headlines in 2023–24 has largely passed, but the question remains relevant: should you fix your rate now or stay variable to benefit from potential rate cuts? The answer depends on your financial situation, but with cuts potentially on the horizon, variable rates may offer more immediate benefits for many borrowers. Sanford Finance provides insights on managing expiring fixed rates.
3. Using SMSFs for Property Investment
SMSFs continue to be powerful vehicles for property investment, offering benefits like lower tax rates on rental income (15% or potentially 0% in retirement phase) and reduced capital gains tax implications. However, with increased ATO scrutiny on SMSF compliance—particularly regarding asset valuations and investment strategy diversification—proper professional guidance is essential. Learn more about purchasing property through an SMSF.
The ATO has intensified its focus on SMSF investment strategies, requiring them to be tailored to specific circumstances rather than using generic documents. As a trustee, regularly reviewing and updating your investment strategy is not just best practice—it’s a legal requirement.
4. Exploring Bridging Finance Solutions
Bridging loans have seen surging demand, with some non-bank lenders reporting a 360% increase in the first quarter of the 2025 financial year compared to 2023–24. These short-term financing solutions can be invaluable if you’re looking to seize a property opportunity before selling your existing home.
5. Debt Consolidation to Improve Cashflow
With the rising cost of living affecting household budgets, consolidating multiple debts into your mortgage could significantly improve your monthly cashflow. This strategy can be particularly effective as we transition to a potentially lower interest rate environment.
Moving Forward: What Should You Do Now?
Whether you’re feeling trapped by your current mortgage terms, considering an investment opportunity, or simply want to ensure you’re positioned optimally for the changing market, May 2025 is an ideal time to review your financial strategy.
The recovery from the post-COVID interest rate surge has been long and challenging for many Australian borrowers. As the RBA’s Assistant Governor Brad Jones noted in April 2024, “Small business lending has not grown over the past year,” and many SMEs have reported “significant challenges accessing bank funding on suitable terms.” However, major banks are now signaling a renewed appetite for lending, with Westpac remarking that “there’s never been a better time to say we’re open for business.”
For homeowners and investors alike, this shift in the lending environment creates both opportunities and complexities. Professional guidance has never been more valuable.
At Sanford Finance, we specialize in navigating these complex financial waters. Our team keeps abreast of regulatory changes, lending criteria shifts, and market opportunities to provide tailored advice for your specific situation.
Whether you’re interested in refinancing options, SMSF property strategies, or exploring how to leverage the changing interest rate environment to your advantage, we’re here to help you make informed decisions.
Contact Sanford Finance today for a no-obligation review of your lending strategy and position yourself to benefit from the changing financial landscape of 2025.
Note: This article is for informational purposes only and does not constitute financial advice. Please consult with a financial advisor to discuss your specific circumstances.
