Fewer than one-third of Aussies optimistic about finances as housing costs top 2025 money worries

Fewer than one-third (28%) of Australians are optimistic about their financial future in 2025, as soaring living costs continue to strain household budgets, according to Canstar’s eighth annual Consumer Pulse Report.

The report reveals the nation’s biggest financial concerns, including rising debt, evolving savings habits, and the pressures of homeownership, borrowing and renting, based on insights from 2,003 Australian adults.

Economic conditions are “taking their toll”

The outlook for cost-of-living relief in 2025 is cautious, a likely result of the fact that Aussies felt little relief in 2024. In fact, 71% of Australians reported no improvement this year – slightly better than the 76% who felt no relief in 2023, but still an overwhelming majority.

If there’s a glimmer of encouraging news to be found here, it’s that a larger proportion of Australians this year, compared to last, feel confident the Reserve Bank (RBA) and the government can ease inflation and lower the cost of living in 2025.

Access the full report here

Optimism is higher among men and younger generations, with 35% of men feeling very or somewhat confident, compared to 21% of women. Confidence also varies by age group, with Gen Z (31%) and Millennials (33%) more optimistic than Gen X (22%) and Baby Boomers (25%).

Canstar’s Data Insights Director Sally Tindall says, “Our data offers a sobering snapshot of the nation’s financial sentiment. Australians are resilient, but with just 28 per cent optimistic about their financial situation in 2025, it’s evident that economic conditions are taking their toll.”

“Although there’s been a slight improvement compared to last year, 71 per cent of Australians say they still aren’t experiencing any cost-of-living relief,” she says.

“Inflation is still a significant challenge for many households, but it’s encouraging to see more Australians this year have confidence in the government and the Reserve Bank’s ability to ease pressures in 2025. Home loan borrowers continue to bear a significant share of the financial burden – a burden they hope will ease next year.”

Housing and food costs dominate financial concerns for 2025

Housing costs, driven by rising mortgage repayments or rents, are Australians’ top financial concern in 2025, with 25% identifying it as their biggest worry – over three times more than five years ago.

Younger generations are the ones hit hardest. Millennials are most affected by rising mortgage interest rates, which is understandable considering monthly repayments on a home loan with a starting balance of $600,000 (and a loan term of 25 years) have risen by up to $1,452 (52%) since April 2022.

Gen Zers, on the other hand, are most concerned about rent costs, with 58% of Gen Z renters seeing a rent hike in 2024, averaging $53 per week or $230 per month.

“Housing costs have become the number one financial concern for Australians in 2025, with a staggering increase in stress compared to five years ago,” says Tindall. “Whether it’s skyrocketing mortgage repayments or surging rents, it’s clear that housing affordability is stretching household budgets to their limits.”

“Moving or negotiating a lower rate loan is one of the easiest ways to reduce mortgage repayment costs.

“Property owners, borrowers and renters shouldn’t stop there. Put all your regular bills – electricity, home insurance, car insurance, health insurance, mobile, internet – on the chopping block and cut ties with any providers if you find a better deal elsewhere. Loyalty won’t pay in 2025.

Other top concerns for 2025 include:

• Grocery costs: Supermarket checkout pain is Aussies’ second-biggest worry for next year, with 20% of Australians naming the price of groceries their top concern – a figure that has doubled over five years. Households say they spend an average of $187 weekly or $813 monthly on groceries, and 74% reported higher costs in the past year.
• Utility costs: The cost of keeping the lights on remains a significant issue for Aussies. That said, the intensity of this concern has decreased, with only 7% of Australians considering the cost of electricity and gas as their top financial worry, down from 14% in 2019 and 30% in the inaugural Report in 2017. This is unsurprising due to the widespread state and federal government rebates this year.
• Insurance costs: The price of premiums is among the top five financial concerns for the first time this year, with Western Australians and Baby Boomers particularly worried about insurance costs in 2025. This year, of those with home and/or contents insurance, the average premium increase was $221, yet only 25% have switched providers in search of a better deal.

Bill payment challenges and rising debt loom in the year ahead

More than one-third (37%) of Australians anticipate being unable to pay at least one regular bill or loan repayment next year.

While the proportion of Australians with personal debt (excluding property loans) has remained relatively steady, the share of those who are debt-free has increased from 47%, up from 42% last year. However, 18% are unsure about their debt status.

At the same time, average personal debt has surged to $15,179, an increase of $6,198 from last year. Gen Z carries the highest average debt among the generations at $23,888, largely due to HECS-FEE HELP loans.

Credit cards, overall, are the leading debt burden with nearly half (49%) of Australians with personal debt (excluding property loans) carrying it on a credit card.

Encouragingly, 76% of Australians with debt plan to prioritise paying it off in part or full in 2025, while in a sign of the times, 14% cannot commit due to focusing on essential living costs. Meanwhile, 8% remain uncertain, and 2% anticipate taking on more debt next year.

Tindall says, “It’s deeply concerning that over one-third of Australians expect to struggle with at least one regular bill or loan repayment next year.”

“Don’t stick your head in the sand” when it comes to debt

“It’s important to get on the front foot before you miss a bill – not after,” says Tindall. “Pick up the phone and ask your provider what your options are, such as making part payments for a period of time.”

“It’s also worth speaking to an independent advisor who can help you come up with a strategy to get you back on your feet with as little fallout as possible. The National Debt Helpline is a really practical place to start because they can put you in touch with a free financial counsellor.

“While it’s encouraging to see more Australians becoming debt-free, the fact that 18% remain unsure about their financial position highlights gaps in financial awareness.

“If you have debt, don’t stick your head in the sand. Getting a greater understanding of your financial position is the first step in working out a roadmap to improve it.”

Property owners to double down and buy when interest rates ease

More than two-fifths (44%) of current property owners are open to purchasing an investment property within the next two years. The three most common motivators include lower interest rates (25%), reduced living costs (23%), and falling property prices (20%).

On the flip side, when asked whether they are considering selling their home or investment property in the next two years, 4% of property owners indicated that they are doing so because they can no longer afford higher loan repayments and a further 19% are selling for a range of reasons from downsizing to divorce.

While the majority of borrowers are prepared should high rates remain elevated in 2025, 40% of owner occupiers and 29% of investors don’t feel financially prepared.

Canstar’s research shows securing a lower interest rate is one of the quick-fire methods for cutting repayment costs. Yet only 10% of borrowers have successfully switched to a new lender in the past 12 months, up from 9% in 2023. An additional 10% have attempted to switch but were denied due to insufficient equity or not meeting the new lender’s requirements.

Refinanced recently? It could be time

Just over one-fifth (21%) were able to negotiate a better interest rate from their current lender this past year.

Tindall says, “If you haven’t refinanced since the start of the rate hikes, it’s time to ask yourself why?”

“A lot of people think they’re in mortgage prison now that rates are higher, but if you haven’t tested the lock recently, try again.”

“A range of lenders are now willing to stress-test refinancers using a buffer of as little as 1 per cent, provided they have a good track record of paying the mortgage, among other checks.”

“It’s important to remember that the effective stress test applied when assessing your mortgage application isn’t usually one flat rate. Banks add a buffer on to the variable rate you are applying for, so the lower this rate is, the easier the stress test might be to pass.”

“For an owner-occupier with a $600,000 debt and 25 years remaining, making the move from an uncompetitive variable rate above 7 per cent to an ultra-competitive one that’s under 6 per cent could see their monthly repayments drop by more than $380.”

Indeed, that amount could represent a couple of free trips around the supermarket, every single month – nothing to be sneezed at when prices at the checkout are a source of concern.

“Interestingly, more than two-fifths of current property owners are open to climbing further up the property ladder over the next two years by purchasing an investment property,” Tindall continued.

“While this has the capacity to increase demand and therefore prices, potentially locking even more first home buyers out of the market, greater investment in new builds might help reduce the load and make owning a home more achievable for more Australians.”

If you want to compare, monitor your credit score, track interest rate changes and access deals, you can download the Canstar app here.

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