2025 Market Wrap: Rate Cuts, Rate Hikes… and Now Uncertainty — What It Really Means for Borrowers

If there’s one theme shaping 2025 so far, it’s confusion about interest rates.

We entered the year expecting cuts.  Then inflation numbers ran hotter and pushed forecasts back.  Markets then priced in no cuts at all. And now, with mixed economic data, analysts are even talking about a possible rate hike in 2026.

Understandably, borrowers are asking: “Should I wait, refinance, fix, or just sit tight?”

Here’s a clearer look at what’s happening — and how to navigate the uncertainty with confidence.

Why Forecasts Have Been Flipping

Inflation is falling, but not smoothly.  Each time it looks under control, another category surges — services costs, insurance, fuel, rents, or wages.  That creates a stop–start disinflation path, making reliable forecasting nearly impossible.

The result?  The RBA can’t commit to cuts.  Markets keep shifting their expectations.  And borrowers are left with mixed messages.

This is why focusing on predictions is risky.  Instead, the smartest borrowers are structuring their finances to stay resilient no matter what the RBA does next.

How Borrowers Are Navigating the Uncertainty

A few key strategies are standing out among clients who are handling this environment well:

• Build a buffer: Plan as though rates stay where they are — or rise slightly. If you can absorb that, you’re well-positioned regardless of what comes next.
• Review your loan structure: Many borrowers are still on outdated rates or products. A quick review can uncover opportunities to reduce repayments or add flexibility.
• Consider a split loan: Part fixed, part variable. It’s not perfect for everyone, but it provides balance — some certainty, some flexibility — in a market where predictions are unreliable.
• Act based on your goals — not the RBA’s next move: Waiting for rates to fall could mean facing more buyers, more competition and higher prices later.

Why Prices Aren’t Falling (Despite High Rates)

Property values remain surprisingly resilient because the underlying issue isn’t borrowing power — it’s supply and demand.
Australia simply isn’t building enough homes, and population growth continues to outpace construction.

This means:

• quality homes remain in strong demand
• prices are holding (or rising) in many markets
• rental shortages continue to support investor confidence

In other words, high rates alone aren’t enough to push prices down meaningfully.

FY25 Market Wrap: What Defined This Financial Year

1. Rates stayed higher than expected: Borrowers adjusted by reviewing loans, reducing spending and building buffers.

2. Inflation stayed sticky: This is the main reason forecasts changed so frequently — and why rates didn’t fall as planned.

3. Borrowing power tightened: Assessment rates remain high, and lender scrutiny has increased.  Regulators are also paying far closer attention on bank policy settings.

4. Prices remained resilient: Strong demand and weak supply kept upward pressure on values.

5. Investors returned cautiously:

• Cash flow and structure mattered more than ever this year.
• Overall, FY25 has been a year of adapting — not panicking.

Where to From Here?

The truth is no one can say with certainty whether rates will fall, hold or rise. But your financial strategy doesn’t need certainty — it needs clarity and flexibility.

If you’re thinking about buying, refinancing or investing, now is the perfect time for a check-in.  A brief conversation can help you understand your position and build a plan that works in any rate environment. 

Feel free to contact your Accountant or our Finance Broker:

Jason O’Shaughnessy

jasono@hmadvisors.com.au

0432 359 973