Can't Make Your Mortgage Repayments? What to Do in 2026

With the RBA cash rate at 4.35%, its highest level since 2011, and three rate hikes landing in 2026, a significant portion of Australian mortgage holders are in financial stress. If your repayments have become difficult to manage, or you are worried about the months ahead, this guide tells you exactly what to do and in what order.

Warning Signs of Mortgage Stress

You may be experiencing mortgage stress if any of the following apply:

• Your mortgage repayments exceed 30–35% of your gross household income
• You are regularly dipping into savings or redraw to make repayments
• You are cutting essential spending (food, utilities, healthcare) to meet mortgage payments
• You are considering or have already used a credit card to cover repayments
• You are more than 14 days behind on a scheduled repayment

Mortgage stress is not a moral failing, it is a direct consequence of rates rising faster than household incomes. The Reserve Bank's own research estimates that approximately 5–6% of Australian mortgage holders were in negative cash flow by mid-2026, covering repayments only by drawing down savings or redraw.

Step 1: Contact Your Lender Before You Miss a Payment

This is the single most important action you can take, and the most commonly delayed. Lenders have dedicated hardship teams, and your options are significantly better before a missed payment than after one. Once a repayment is missed, it is recorded on your credit file and your negotiating position weakens.

Call your lender's hardship line (not the general enquiry line) and say: "I am experiencing financial hardship and would like to apply for a hardship variation." Write down the date, time, and name of the person you spoke to.

Your Legal Rights: What Lenders Must Do

Under the National Consumer Credit Protection Act 2009 (NCCP), if you make a hardship application in writing, your lender is legally required to:

• Acknowledge your application within 21 days
• Respond to your hardship request within 21 days (or if they cannot approve it, explain why in writing)
• Not take enforcement action (such as issuing a default notice) while your hardship application is under active consideration

This is a legal right, not a favour. Every lender regulated by ASIC must comply.

What Lenders Can Offer

Lenders have a range of tools available. The most common arrangements are:

Option	What it means	Best for
Payment deferral	Pause repayments for 1–6 months; deferred interest is capitalised (added to the loan balance)	Short-term income disruption, job loss, illness, parental leave
Interest-only period	Temporarily switch to interest-only repayments, reducing monthly payment by 20–35%	Borrowers with adequate equity who need cash flow relief for 12–24 months
Loan term extension	Extend the remaining loan term by 2–5 years, reducing the monthly repayment permanently	Borrowers who have no realistic prospect of returning to current repayments
Reduced repayments	Temporarily accept lower payments, with arrears recorded and resolved later	Short-term cash flow shortfall
Fee waivers	Waive break costs, discharge fees, or penalty interest during the hardship period	Borrowers refinancing out of the loan

Lenders are not obliged to grant every request, but they must genuinely consider your application. If your application is declined, you can escalate to the lender's internal dispute resolution team, and if still unresolved, to the Australian Financial Complaints Authority (AFCA) at no cost.

Is Refinancing an Option?

If you have meaningful equity in your property (generally 20%+ after the outstanding loan) and your income can still support a loan, even with stress, refinancing can provide meaningful relief:

• Lower rate, Switching from 6.5% to 5.8% on a $600,000 loan saves $230/month
• Longer term, Extending from 20 years remaining to 30 years reduces monthly repayments by approximately 20%
• Interest-only, Some lenders offer IO terms to investors or owner-occupiers in temporary financial hardship
• Cashback offers, Some lenders offer $2,000–$4,000 cashbacks on refinance, which can cover immediate costs

Use our Mortgage Stress Calculator to see how a rate change affects your repayments, then book a free assessment to explore your options. A broker can assess within 24–48 hours whether refinancing is viable for your situation and which lenders are most likely to approve. Importantly, if you are already in arrears, some specialist lenders still consider refinancing, this is not automatically off the table. Book a free assessment.

Free Help Available Right Now

• National Debt Helpline: 1800 007 007, Free, confidential financial counselling 24/7. Operated by financial counsellors, not salespeople.
• MoneySmart (ASIC), Free budgeting tools and hardship guidance at moneysmart.gov.au
• AFCA, If your lender refuses a reasonable hardship request, lodge a complaint at afca.org.au, free for consumers
• Your state's Legal Aid, If you have received a default notice or court documents, seek legal advice immediately

The most important thing: act early. Every week of delay reduces your options. A call to your lender or a free consultation with a broker costs nothing, a missed payment costs significantly more.