What is mortgage stress and how can you manage it?

• Mortgage stress often builds gradually, not just after missed repayments, as interest rates and living costs put pressure on household cash flow.

• Spending more than 30% of pretax income on mortgage repayments is a common guide, but sustainability depends on income, expenses and financial buffers.

• Early action creates more options, including budgeting adjustments, lender support, using loan features, or reviewing your loan structure.

• Refinancing or restructuring may help in some cases, but suitability depends on eligibility, costs and lender criteria.

Higher interest rates and ongoing cost-of-living pressures have made mortgage repayments harder to manage for many Australian households. For some borrowers, repayments are absorbing a larger share of income than planned. For others, everyday expenses are leaving less room to move.

Mortgage stress rarely starts with missed repayments. It usually builds over time as loan costs, utilities, groceries and insurance premiums increase faster than household cash flow. Recognising the early warning signs matters because the earlier you act, the more options are typically available.

This guide explains what mortgage stress means in practical terms, how to identify it early, and the steps borrowers can take to regain control. It’s designed for home loan holders who want clarity, not alarm and who want to understand their options before financial pressure turns into hardship.

What is mortgage stress?

Mortgage stress occurs when a household can no longer comfortably meet its home loan repayments while still covering essential living costs.

In Australia, mortgage stress is commonly assessed using the 30% rule, where more than 30% of pretax household income goes towards mortgage repayments. This benchmark is widely referenced because it provides a simple starting point for assessing whether repayments may be placing pressure on a household budget.

However, the 30% rule is a guide, not a rulebook. Its relevance depends on income level, household expenses and financial buffers. Higher-income households may be able to spend more than 30% on their mortgage and still manage essential costs and savings. For lower-income households, pressure can emerge well before that threshold is reached.

What matters most is repayment sustainability. If your mortgage leaves little room for everyday expenses, savings or unexpected costs (particularly as interest rates and living costs change), that’s when mortgage stress can start to develop.

Understanding this early puts you in a stronger position. It allows you to review your loan, reassess your budget and explore support options before financial pressure escalates into missed repayments.

Signs you may be in mortgage stress

Mortgage stress doesn’t usually start with missed repayments. In many cases, the warning signs appear well before that point. Identifying them early matters because it can widen the range of options available and reduce the risk of formal hardship.

Your repayments are becoming difficult to manage.

If meeting your home loan repayment is starting to feel tight (or depends on your pay landing at exactly the right time), it can indicate growing pressure on your cash flow. Even occasional late or rescheduled payments may suggest your loan is no longer well-aligned with your income and expenses.

You might also be interested in: Get your finances organised: 7 healthy habits

You’re relying on credit to cover everyday costs.

Using credit cards, personal loans, or buy-now-pay-later services for essentials like groceries, utilities, or fuel can be a sign that regular income isn’t covering core living costs. Over time, this can increase overall debt and make mortgage repayments harder to sustain.

You might also be interested in: 6 ways to improve your credit score

You don’t have a financial buffer.

Limited or no emergency savings means there’s little room to absorb unexpected costs, such as medical expenses, car repairs or temporary income changes. Without a buffer, even minor disruptions can affect your ability to keep repayments on track.

You’re cutting back on essentials to prioritise your mortgage.

Reducing discretionary spending is common during tighter periods. But if you’re regularly cutting back on essentials (such as food, healthcare, insurance or education) to meet your mortgage, it may indicate your loan is placing ongoing strain on your household budget.

You’re avoiding your finances altogether.

Avoiding bank statements, delaying bill payments or feeling anxious about checking balances is often overlooked, but it’s a common early sign of financial stress. Avoidance can delay action at a time when proactive steps are usually simpler and more effective.

If some of these signs apply to you, it may be worth reviewing your home loan and considering whether to speak with a broker or financial counsellor. An Aussie Broker can help you review your cash flow, understand how your current loan is performing, and talk through options that may ease pressure based on your circumstances and lender criteria.

How common is mortgage stress in Australia?

Mortgage stress has become more widespread in recent years, particularly as higher interest rates and living costs continue to pressure household budgets. While not every borrower is affected in the same way, a growing share of Australian households are finding their mortgage harder to manage than expected. In 2026, several factors continue to contribute to this pressure:

• Interest rates remaining higher for longer, increasing repayments for variable-rate borrowers and those rolling off fixed rates

• Rising living costs, including energy, groceries, insurance and healthcare

• Larger average loan sizes, reflecting higher property prices over recent years

• Tighter household cash flow, where wage growth hasn’t always kept pace with expenses

Mortgage stress doesn’t affect one single group. It can impact owner-occupiers and investors, newer borrowers and long-term homeowners, particularly when multiple pressures combine all at once.

That’s why regularly checking in on your home loan and cash flow matters. Understanding broader market conditions can help you identify emerging pressure early and take steps to reduce it before repayments become difficult to manage.

Mortgage stress test: How to check your risk

A practical way to assess your risk of mortgage stress is to run a simple stress test on your own finances. This isn’t about forecasting worst-case scenarios. It’s about understanding how sustainable your repayments are now and how much buffer you have if conditions change.

1. Use the 30% rule as a starting point.

A common mortgage stress check looks at how much of your pretax household income goes towards home loan repayments. If your repayments are consistently above 30%, it can signal emerging pressure, particularly when combined with rising living costs. This doesn’t automatically mean you’re in mortgage stress. The 30% rule is a guide, not a fixed threshold.

What matters is whether your repayments leave enough room for everyday expenses, savings and unexpected costs.

2. Test your loan under different scenarios.

A useful stress test looks beyond today’s figures and asks how your loan would perform if circumstances change. For example:

• Could you manage repayments if interest rates rose further?

• What happens if your income drops temporarily?

• Would higher insurance, childcare or energy costs push your budget out of balance?

Running these scenarios can help identify risk early before repayments become difficult to manage.

You can start by using our mortgage repayments calculator to see how changes in interest rates affect your monthly repayments.

Example: Impact of a rate increase on repayments

Even relatively small rate increases can have a noticeable impact on cash flow, particularly if your budget is already tight.

You might also be interested in: RBA interest rate cut outlook for 2025: What’s next and how to plan

3. Look beyond the numbers.

A mortgage stress test isn’t just a calculation.It’s a broader check-in on how your finances are holding up. You may be at risk of mortgage stress if:

• You’re meeting repayments but have little capacity to save

• Unexpected expenses regularly go on credit

• Your budget only works if everything goes exactly to plan

If any of this sounds familiar, it may be time to review your loan structure or repayment strategy.

An Aussie Broker can help you stress-test your home loan properly (factoring in rates, loan features, cash flow and potential changes) and talk through options that may improve sustainability, based on your circumstances and lender criteria.

Does mortgage stress only affect low-income households?

Mortgage stress isn’t limited to any single income group. While lower-income households are generally more exposed, borrowers with higher incomes can also experience pressure, particularly when large loans and rising expenses combine.

For example, a household with a high income may still feel stretched if they’re managing:

• A sizeable mortgage, often linked to higher property prices

• Multiple debts, such as car loans, credit cards or investment loans

• Growing household costs, including childcare, school fees, insurance or healthcare

In these situations, mortgage stress can develop even when repayments sit below commonly used benchmarks like the 30% rule. That’s why income alone doesn’t tell the full story.

What matters most is how well your mortgage fits within your overall budget and whether repayments remain manageable as interest rates and living costs change.

How can mortgage stress affect your finances and well-being?

Mortgage stress isn’t limited to your loan balance. Over time, ongoing financial pressure can affect cash flow, decision-making and overall well-being, often building gradually rather than appearing all at once.

Ongoing pressure on cash flow

When repayments take up more of your income than planned, everyday finances can become harder to manage. This may show up as difficulty keeping up with bills, increased reliance on credit for everyday expenses, or limited capacity to save or absorb unexpected costs.

Left unchecked, this pressure can compound over time.

Flow-on effects at home

Financial strain often extends beyond numbers. Worry about repayments can affect household dynamics, contribute to tension in relationships and limit discretionary spending.

Decisions that were once straightforward (such as extracurricular activities or short breaks) may start to feel more constrained.

Impact on mental and physical well-being

Sustained financial stress can affect well-being. Many people report ongoing worry, disrupted sleep or difficulty concentrating when money feels uncertain. Over time, this can have broader impacts on both mental and physical health.

Decision-making under pressure

When budgets feel tight, it’s harder to make clear, long-term decisions. Some borrowers may turn to short-term fixes, such as high-interest credit, without the space to fully assess the longer-term implications. Access to informed support can help create breathing room and avoid reactive choices.

Mortgage stress is common, and support is available. Recognising how financial pressure is affecting you is often the first step toward easing it.

What can I do to prevent mortgage stress?

Mortgage stress isn’t always avoidable, but you can reduce (or prevent) many risks with planning and regular check-ins. Prevention is less about getting everything right once and more about making sure your home loan continues to fit your finances as circumstances change.

Build breathing room into your budget.

From a financial planning perspective, preventing mortgage stress starts with building enough room in your budget to handle change.

Borrow within your comfort zone.

Aim for repayments that are manageable not just today, but if interest rates rise or income changes. A loan that leaves room for everyday expenses, savings and flexibility is generally more sustainable, even if that means buying below your maximum borrowing capacity.

You might also be interested in: How to boost your borrowing power before buying

Maintain an emergency buffer.

An emergency savings buffer can help absorb short-term shocks, such as unexpected bills or temporary changes in your income. Even a few months’ worth of essential expenses or repayments can reduce pressure when conditions shift.

Manage your loan, not just your rate.

This part of prevention focuses on loan management, making sure your home loan’s structure, features and settings continue to support your cash flow.

Use flexible loan features effectively.

Features like offset accounts or redraw facilities can help smooth cash flow and reduce interest over time, when used correctly and in line with lender rules. Understanding how these features work can make a meaningful difference.

Review your loan regularly.

A home loan that suited you a few years ago may be unfit for you today. Reviewing your loan every couple of years (or when your circumstances change) can help ensure your rate, features and structure still support your budget.

Keep other debts in check.

As part of loan management, managing personal debt is about making sure credit cards and loans don’t place added strain on your mortgage repayments.

You might also be interested in: Explained: Debt consolidation home loans

Limit unnecessary borrowing.

Multiple debts can increase financial pressure, particularly when interest rates and living costs are rising. Keeping credit cards, personal loans and buy-now-pay-later commitments under control can help protect cash flow.

Consider consolidation carefully.

In some cases, consolidating higher-interest debts may simplify repayments and improve cash flow. Whether this is appropriate depends on your circumstances, loan type and lender criteria, so ensure to understand the trade-offs.

You might also be interested in: Benefits of consolidating personal debt

Preventing mortgage stress is about regular review and early action. Small adjustments made early can help keep your finances on track and preserve options if conditions change.

What can I do to manage mortgage stress right now?

If mortgage repayments are starting to feel tight, acting early can make a real difference. Mortgage stress doesn’t automatically mean hardship, and in many cases, there are practical steps you can take to stabilise your situation and regain control.

1. Contact your lender early.

If you’re finding repayments harder to meet, contact your lender as soon as possible. Most lenders have dedicated hardship or support teams that can discuss short-term options to ease pressure, depending on your circumstances.

Timing matters. Reaching out early generally gives you more flexibility than waiting until repayments are missed.

2. Review your budget and cash flow.

Take a clear, realistic look at your income and expenses to identify where pressure is coming from. Even small adjustments (such as reducing discretionary spending or reprioritising essential costs) can help improve cash flow in the short term.

This step isn’t about cutting everything back. It’s about clarity, so you can make informed decisions rather than reacting under pressure.

3. Use available loan features carefully.

If your home loan includes features like an offset account or a redraw facility, these may help provide temporary relief, but are subject to your lender’s rules. Accessing funds you’ve already built up, or using an offset more effectively, can help smooth cash flow during tighter periods.

It’s important to understand how these features work, as they can affect interest costs and longer-term outcomes.

4. Review refinancing or restructuring options.

In some situations, refinancing or restructuring your loan may help reduce pressure. For example, by adjusting repayments, changing features or accessing a more suitable rate. Refinancing isn’t appropriate for everyone, and costs and eligibility apply, but reviewing your options can be worthwhile if your loan hasn’t been assessed recently.

An Aussie Broker can help you understand whether refinancing or restructuring could improve cash flow, based on your circumstances, without needing to compare lenders yourself.

5. Get professional support.

You don’t have to manage mortgage stress on your own. If you’re feeling overwhelmed or unsure what to do next, speaking with a qualified professional can help.

Free, confidential support is available through financial counsellors, who can help you understand your options. You can contact the National Debt Helpline on 1800 007 007 (Monday to Friday).

Meanwhile, an Aussie Broker can also review your home loan, explain your options clearly and help you take practical next steps.

Remember, mortgage stress doesn’t automatically mean you’ll lose your home. For many borrowers, it’s a signal that something needs adjusting, not that you can't improve the situation. Acting early usually means more options and better outcomes.

If you’d like support reviewing your loan or understanding your next steps, your Aussie Broker can help.

When should I seek professional help?

Mortgage stress can often be managed with early action, but there are times when professional support can help prevent pressure from escalating. Knowing when to reach out can make it easier to stabilise your situation and move forward with clearer options.

It may be time to seek professional help if you’re experiencing any of the following:

• You’ve missed a repayment, or expect to miss one soon

• You’ve received overdue notices or follow-up calls from your lender

• You’re relying on credit to cover everyday living expenses

• You feel stuck, overwhelmed or unsure which option to take next

These are indicators that additional guidance could help you regain clarity and control.

Financial counsellors: Immediate, independent help

If you’re under significant pressure, a financial counsellor can provide free, confidential support. They can help you understand your rights, communicate with your lender and work through short-term solutions designed to stabilise your situation. Financial counsellors don’t sell products and focus solely on your financial wellbeing.

You can contact the National Debt Helpline on 1800 007 007 (Monday to Friday) to be connected with a qualified financial counsellor.

Mortgage brokers: Reviewing your loan and longer-term options

A mortgage broker can help once you’re ready to review your home loan itself. This may include assessing your current loan structure, checking whether refinancing or restructuring could reduce pressure, or explaining how existing loan features could be used more effectively.

An Aussie Broker can assess your situation, explain your options in plain English, and help you understand what’s realistic based on your circumstances and lender criteria.

Seeking help isn’t a failure; it’s a practical step many borrowers take when conditions change. Acting sooner typically means more options and better outcomes. If you’re unsure where to start, an Aussie Broker can help you work through the next steps and guide you to the right support.

FAQs about mortgage stress

What is mortgage stress in Australia?

Mortgage stress occurs when a household struggles to meet home loan repayments without putting pressure on essential living costs. It’s often assessed using the 30% pretax income benchmark, but this is a guide and doesn’t reflect every household’s situation.

Can refinancing help with mortgage stress?

In some cases, refinancing may help reduce pressure by lowering repayments or improving loan flexibility. Whether it helps depends on eligibility, costs and lender criteria, so it’s important to assess the overall impact, not just the rate.

Does mortgage stress affect my credit score?

Mortgage stress itself doesn’t affect your credit score, but missed or late repayments can. Contacting your lender early can help protect your credit history if repayments are becoming difficult.

What should I do first if I’m experiencing mortgage stress?

Start by contacting your lender to discuss support options, then review your budget to identify where pressure is coming from. A financial counsellor or an Aussie Broker can also help you understand your options and next steps.

You don’t have to manage mortgage stress alone

Mortgage stress is something many Australian households are navigating in 2026. Experiencing it doesn’t mean you’ve made a mistake; it usually reflects changes in interest rates, living costs or personal circumstances that require a review.

What matters most is acting early. Options may include adjusting your budget, using existing loan features, speaking with your lender about short-term support, or reviewing whether your current loan still suits your situation. In some cases, restructuring or refinancing may also be worth exploring. The right approach depends on your circumstances and lender criteria.

An Aussie Broker can help you understand these options clearly. That may involve reviewing how your current loan is performing, explaining alternatives in plain English, and helping you work out practical next steps based on your goals and cash flow, not assumptions.

If you’re unsure where to start, talk to an Aussie Broker and get guidance tailored to your situation.