Mortgage Stress in Australia: Signs, Real Options and Where to Get Help

The most recent data from Roy Morgan, as of March 2026, shows that 1.319 million Australian mortgage holders, representing 26.6 per cent of all mortgage holders, are classified as being at risk of mortgage stress. That is more than one in four people with a home loan. Following two RBA rate hikes in early 2026 that returned the cash rate to 4.10 per cent, that number continues to climb.

If you are feeling the pressure of your mortgage repayments, this article is for you. It covers what mortgage stress actually is, how to recognise it before it becomes a crisis and, most importantly, the concrete steps available to you.

What Is Mortgage Stress?

Mortgage stress is typically defined as a situation where mortgage repayments consume more than 30 per cent of a household's gross income. Some analysts use 30 to 35 per cent as the threshold; others classify it by whether repayments exceed after-tax income to a material degree.

Roy Morgan's classification adds a serviceability dimension: a household is at risk when its income, adjusted for size and composition, falls below the level needed to meet mortgage payments plus essential living expenses.

For a practical household benchmark: if your combined household income before tax is $150,000 and your mortgage repayments are more than $45,000 per year ($3,750 per month), you are in stress territory by the 30 per cent definition.

Signs That You Are in Mortgage Stress

Mortgage stress does not always announce itself clearly. Signs to watch for include:

Making repayments on time but having nothing left over for savings or unexpected expenses.

Deferring essential maintenance, healthcare or insurance to meet mortgage payments.

Relying on credit cards or buy-now-pay-later products to cover everyday expenses.

Anxiety about what happens if your income drops even briefly.

Avoiding opening bills or bank statements.

If any of these apply, the time to act is now, before the situation deteriorates into missed payments or formal default.

The Highest-Impact Step: Review Your Rate

The single most effective action for most mortgage holders under stress is to check whether their rate is still competitive. Research consistently shows that long-term borrowers overpay relative to what is available in the market. A rate 0.75 per cent above the most competitive available option on a $600,000 loan costs approximately $4,500 per year in unnecessary interest.

Using HomeLoanTools.com.au's free Refinancing calculator, you can compare your current rate with the best available alternatives and estimate exactly how much you could save by refinancing.

Options Available to Borrowers Under Pressure

Refinancing to a Lower Rate

If your equity position, income and credit history still support a clean application, refinancing to a lower-rate lender can reduce your repayments immediately. Even a 0.3 to 0.5 per cent rate reduction generates several hundred dollars per month in relief on a typical Australian mortgage.

A mortgage broker can assess your refinancing eligibility without a hard credit enquiry at the outset, and can identify lenders whose policies best match your current circumstances.

Requesting a Rate Reduction From Your Existing Lender

Before refinancing, call your lender and ask for a rate reduction. Banks routinely reduce rates for customers who ask, particularly when those customers demonstrate knowledge of competing offers. This can be faster than refinancing and avoids the process involved in switching.

Switching to Interest-Only Repayments Temporarily

If you own the property but are an investor or if your lender allows it for owner-occupiers in hardship, switching to interest-only repayments for a period can reduce monthly obligations significantly. On a $700,000 loan at 6.5 per cent, the difference between P&I and IO is approximately $800 to $1,000 per month.

This should be a short-term measure. You will need to return to P&I eventually, at which point repayments will be higher because you have not reduced the principal during the IO period.

Extending the Loan Term

Some lenders will allow you to extend your remaining loan term back toward 30 years, reducing the principal portion of each repayment. This increases your total interest paid over the life of the loan but reduces monthly cash flow pressure now.

Accessing Your Redraw Facility

If you have previously made extra repayments, those funds may be accessible via a redraw facility. Drawing on accumulated redraw to meet repayments during a short-term income disruption can provide a bridge without requiring formal hardship arrangements.

Using Your Offset Account Balance

If you have a meaningful offset balance, the interest savings are already built into your repayment calculation. In a cash flow crisis, moving offset funds to a different purpose provides immediate relief, though it increases the interest you pay going forward.

Formal Financial Hardship Assistance

If you are genuinely unable to meet your repayments, all licensed lenders in Australia are required under the National Consumer Credit Protection Act to have a financial hardship process. You have a legal right to request this assistance.

Contact your lender's hardship team directly. You do not need to be in arrears to start this conversation. Common hardship arrangements include:

A temporary pause on repayments (a mortgage holiday of two to six months).

Temporary reduction to interest-only repayments.

Capitalisation of arrears if they have already accumulated.

Lenders prefer to negotiate hardship arrangements over seeing a customer default. The process is private, does not automatically affect your credit file (though the terms of any arrangement may be reported), and can provide meaningful relief while you stabilise.

Free Financial Counselling Services

The National Debt Helpline (1800 007 007) provides free, confidential financial counselling from accredited counsellors who can help you understand your options, negotiate with lenders and access government support services. This service is available Monday to Friday during business hours.

ASIC's MoneySmart website also provides detailed guidance on mortgage stress and hardship options.

The Worst Thing You Can Do

Doing nothing. Mortgage stress that is ignored becomes arrears. Arrears that are not addressed become defaults. Defaults lead to credit file damage, legal action and ultimately forced sale of the property. Every step in that escalation is harder to recover from than the one before.

If you are feeling the pressure, the options above are available to you. Act early.