By Jason Given - 2026-08-31 - 7 min read
Mortgage stress is traditionally defined as spending more than 30% of gross household income on housing costs. By that measure, 28.2% of Australian mortgage holders - approximately 1.47 million people - are currently at risk, according to Roy Morgan.
But the numbers tell only part of the story. Finder's 2026 Home Loan Report found that 29% of borrowers are spending more than 50% of their net income on their mortgage. And 9% say they would default with just one or two more rate rises.
The definition matters less than the feeling. If your repayments are causing you to cut back on essentials, avoid medical appointments, or lose sleep, you need to act. Here are seven practical steps - ordered from the quickest wins to the more structural changes.
This is the quickest win. The average variable rate is approximately 6.92%. If you are above this, you may be overpaying.
Many borrowers have not reviewed their rate since their fixed period ended or since they originally settled. Lenders do not automatically move you to the best available rate - you stay on whatever rate you were given unless you ask for better.
A 0.5% rate reduction on a $600,000 loan saves approximately $190 per month - that is $2,280 per year back in your pocket.
Lendology runs a free rate comparison across 60+ lenders. It takes 15 minutes and costs nothing.
If a better rate exists with another lender, refinancing is the single most impactful change you can make. Moving from 7.2% to 6.4% on a $600,000 loan saves you roughly $370 per month.
The catch: APRA's 3% serviceability buffer means you need to qualify at your new rate plus 3%. So even though a 6.4% rate would ease your repayments, you need to pass the stress test at 9.4%.
Some borrowers are "mortgage prisoners" - they can afford their current repayments but cannot pass the stress test to refinance to a cheaper loan. If this is you, Lendology can explore lenders with exceptions for like-for-like refinancing, non-bank options (which are not subject to APRA's buffer in the same way), or hardship refinancing pathways.
Read more: Refinancing and the serviceability stress test
If refinancing is not an option right now, your existing lender may still be able to help. These changes do not require a full refinance application:
If you have an offset account, consolidate all your savings into it. Every dollar sitting in an offset account reduces the interest charged on your loan. Money in a regular savings account earning 4% is less effective than money in an offset reducing interest at 6.9%.
If you have been making extra repayments, check whether you can redraw to create a cash buffer. This can give you a safety net for the months ahead.
One important warning: do NOT draw redraw funds into a separate account and then put them back. For investment loans, this can contaminate the tax deductibility of your interest. If your loan has an investment component, get advice before touching redraw.
Credit card minimum repayments and personal loan repayments compound the problem. If you are paying 20%+ interest on credit card debt while your mortgage is at 6-7%, the maths is working against you.
Consolidating credit card debt into your home loan reduces the interest rate dramatically. But be careful - this turns short-term debt into 30-year debt if you do not maintain the higher repayments. The strategy only works if you close the cards and keep the repayments up.
Close unused credit cards. Even with a zero balance, they count against your borrowing capacity because lenders assess you on the credit limit, not the balance.
Read more: Debt consolidation home loans
Banks are legally required to offer hardship assistance if you are genuinely struggling. This is not a favour - it is a regulatory obligation under the National Consumer Credit Protection Act.
Options include temporary repayment reductions, payment pauses (typically 3-6 months), or capitalising arrears back into the loan balance.
A hardship arrangement does NOT automatically affect your credit file if managed proactively. What damages your credit is missing repayments without any arrangement in place. The key is to contact your lender before you fall behind - not after.
Read more: Home loan hardship guide
If you are in mortgage stress, speaking to a mortgage broker costs you nothing and can identify options you did not know existed. Lendology reviews your current loan, compares it across 60+ lenders, and identifies the most impactful change for your situation - whether that is refinancing, restructuring, or something else entirely. Every conversation is confidential.
Mortgage stress is generally defined as spending more than 30% of your gross household income on housing costs. However, the lived experience matters more than the number. If your mortgage repayments are forcing you to cut back on essentials, avoid necessary expenses, or causing financial anxiety, you are under stress regardless of the percentage.
It depends. APRA's serviceability buffer requires you to qualify at your current rate plus 3%, which can prevent some borrowers from refinancing even to a lower rate. However, some lenders have exceptions for like-for-like refinancing, and non-bank lenders are not subject to APRA's buffer in the same way. Lendology checks all options before telling you what is possible.
Not necessarily. If you contact your lender proactively and enter into a formal hardship arrangement before missing any payments, it should not appear as a default on your credit file. What does affect your credit score is missing repayments without any arrangement in place. The key is to act early.
On a $600,000 loan, a 0.5% rate reduction saves approximately $190 per month or $2,280 per year. A 1.0% reduction saves approximately $370 per month or $4,440 per year. Lendology runs a free comparison to identify your potential saving.
Feeling the pressure?
Book a confidential chat with Jason or Steve. We will review your loan and tell you exactly what options are available - at no cost.