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The latest Australian Consumer Stress Barometer from illion, an Experian company, highlighted growing financial challenges for lower-income households in 2025.
The analysis, based on millions of credit-active Australians, revealed that while mortgage stress has moderated, the financial outlook for lower-income and non-home-owning Australians is becoming more precarious.
With interest rates stabilising and lending policies evolving, Australians who purchased homes since 2023 are generally in a better financial position than those who bought before that year. However, the situation remains tough for those who are unable to purchase property.
For renters, living costs continue to rise, particularly for lower-income households, where rent increases were as high as 15 per cent in 2024.
National savings fell by 19 per cent during the same period, further exacerbating financial pressures. Additionally, credit stress among personal loan holders rose by 2.5 per cent in 2024, a fivefold increase compared to mortgage holders.
Barrett Hasseldine, head of modelling at illion, said that the data revealed a widening housing divide: “Mortgage holders who were under stress over the past two years are now finding their footing, but renters and lower-income Australians are running out of options.
“While rents and personal loan stress are increasing, there are proactive steps and resources available to help Australians manage these challenges and maintain financial stability.
“This is a timely reminder to lenders of the importance of continuously profiling customers to assess and reassess their financial health and risk so they can proactively support them if required.”
Young Australians and renters face the sharpest financial pressures
The report also revealed that young Australians, particularly those in their 20s and 30s, are under heightened financial pressure. Under-30s saw a 4 per cent increase in credit default risk in 2024, four times the average rate of all credit consumers.
Personal loan arrears also rose by over 6 per cent across all age groups. These young Australians, often with fewer savings and limited or no home equity, are especially vulnerable to rising costs, particularly in the rental market.
Housing affordability remains a major driver of financial stress. With stricter mortgage lending criteria in place, many potential home buyers have been forced into the rental market, where demand is pushing up prices.
While national rents rose by 6 per cent in 2024, the rise for lower-income households was closer to 15 per cent – well above wage growth. Renters, unlike mortgage holders, do not benefit from interest rate cuts, and many face limited relief.
“A generation of Australians are currently renting, facing challenges in the housing market. Unlike mortgage holders, who may have benefited from rate cuts, renters have no relief in sight. For many, rising rent is a significant challenge, and they have fewer safety nets to fall back on,” Hasseldine said.
BNPL use soars amid rising regulation
The report also found that buy now, pay later (BNPL) spending surged by 32 per cent in 2024, as more households turned to instalment payments to manage cash flow and avoid traditional credit card debt. BNPL has emerged as a key financial tool, especially for younger Australians and those struggling with rising living costs.
The growth of BNPL comes ahead of new regulations set to take effect on 10 June 2025. These new rules will impose stricter lending guidelines on BNPL products, bringing them closer in line with traditional credit products.
Hasseldine said that while the upcoming legislation aims to reduce financial risk, it is important to ensure that consumers who rely on BNPL for everyday expenses still have access to these services: “BNPL is helping Australians manage their budgets by providing flexibility for many households. However, it can also be a sign of financial difficulties. As regulation develops, it will be worth observing how access to alternative options for consumers is balanced with financial stability.”
Natural disasters increase financial risk as insurance cover declines
Amid rising financial stress, the report also said that Australians are cutting back on insurance, leaving many financially exposed, especially as extreme weather events, such as Cyclone Alfred, become more frequent.
Health insurance spending dropped by 11 per cent in 2024, as many households reduced coverage or increased excesses. General insurance spending (home, car, and contents) fell by 2 per cent, while insurance inflation surged by 11 per cent, making policies more expensive to maintain.
Hasseldine said that cutting insurance to save money now could lead to serious challenges in the future: “While Australians have fewer savings in their rainy-day accounts, ex-Cyclone Alfred is a timely reminder of the importance of insurance.”
As financial pressures continue to mount for lower-income Australians, the need for financial literacy, proactive support, and careful risk management has never been more critical.
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