Mortgage hardship in 2026: what to do before you miss a payment

Roy Morgan now classes 32.5 per cent of mortgage holders, about 1.786 million people, as "at risk" of mortgage stress. That July reading is the highest since September 2008, and 1.21 million of them sit in the "extremely at risk" group. The banks' own books are moving the same way. Commonwealth Bank's home loan arrears rose to 0.73 per cent and personal loan arrears to 1.72 per cent in the year to June, and CBA says it set up more than 147,000 tailored payment arrangements for customers in difficulty. The Reserve Bank decides tomorrow, Tuesday 29 September at 2:30pm, with markets pricing about a 90 per cent chance of a rise to 4.60 per cent. For some households the answer is a refinance. For others the gap between income and repayments is wider than any rate saving, and the right next step is a hardship arrangement with the lender they already have. This is the plain-English guide to that conversation.

A note up front: this article is general information. We are an education publisher, not a credit provider or financial counselling service. If you are in genuine financial difficulty, the National Debt Helpline (1800 007 007) is free, independent and not selling anything. The first call in this article, to your own lender's hardship team, is also free. Neither of them pays a broker a cent, and both are usually the right place to start.

The numbers behind the stress, September 2026

• Mortgage stress risk: 32.5 per cent of mortgage holders at risk in July (Roy Morgan, released 1 September), up for six months in a row and the highest since September 2008.
• CBA: home loan arrears 0.73 per cent and personal loan arrears 1.72 per cent, both up, with more than 147,000 tailored payment arrangements in FY26 (full year results, 12 August). CBA's own release encourages customers in difficulty to contact it early.
• ANZ: Australian home loans more than 90 days past due rose to 0.86 per cent at 30 June, from 0.83 per cent at 31 March (3Q26 trading update, 12 August).
• The wider market: S&P Global Ratings put prime RMBS arrears (30 days or more) at 0.85 per cent in June and non-conforming at 3.42 per cent. APRA's June quarter statistics, released 17 September, show 1.01 per cent of home lending by banks and other deposit-takers as non-performing.
• Complaints: AFCA received a record 119,949 complaints in 2025-26, and financial difficulty complaints rose 17 per cent on the year.
• Income: unemployment rose to 4.6 per cent in August, the highest since late 2021. Wages grew 3.2 per cent in the year to June, behind inflation of 3.8 per cent to June and 3.5 per cent to July, so real wages are going backwards.

Read those together and the pattern is clear: arrears are still low in absolute terms, but every measure is heading the same way, and job losses are what turn a tight budget into missed payments. S&P's own analysts call unemployment the most significant leading indicator for household finances.

What a 0.25 point rise would add

The RBA has not decided yet, so treat this as a scenario, not a result. On a $600,000 principal and interest loan with 25 years left, a variable rate of 6.20 per cent costs about $3,939 a month. If a 0.25 point rise were passed on in full, taking the rate to 6.45 per cent, the repayment would be about $4,033: roughly $93 a month, or about $1,120 a year, extra. Those figures are illustrative calculations on those assumptions. If $93 a month is the difference between coping and not coping, you are exactly the borrower this article is for, and the time to call is before the new repayment lands, not after.

What is a hardship variation, actually?

Under section 72 of the National Credit Code, if you are, or will be, unable to meet your repayments, you can tell your lender. That is a hardship notice, and it can be given over the phone or in writing. You do not need to have missed a payment first: the words "or will be" are why asking early works. The lender must then consider changing the loan so you can get back on track. The change can take several forms: a repayment pause for a set period, reduced repayments for a set period, a switch to interest-only for a set period, a longer loan term, or capitalising arrears (adding missed payments to the balance and resetting future repayments).

The lender has to consider the request. It does not have to grant any particular change. What it must do is answer in writing, on a clock, and if it says no, tell you why and how to complain to AFCA.

The clock your lender has to meet

• 21 days to respond. If the lender needs nothing more from you, it must tell you the outcome in writing within 21 days of your hardship notice.
• If it asks for information, it has to ask within those 21 days, and you get 21 days to supply it. The lender then has 21 days from receiving your information to decide, or 28 days from its request if you never send anything.
• A refusal must be in writing, with the reasons and AFCA's contact details.
• If you then complain to the lender, ASIC's complaint handling rules (RG 271) give it 21 days to resolve a complaint about a hardship notice, rather than the usual 30.

These deadlines are enforced. In 2025 the Federal Court ordered NAB and AFSH Nominees to pay $15.5 million after 345 customers who applied for hardship between 2018 and 2023 were never told the outcome, largely because staff used a "reject" button that stopped the letters going out. Keep a note of the date you gave notice, who you spoke to and any reference number.

Why does timing matter so much?

• Credit file. Missed repayments show on your credit report as repayment history information for two years, and a default listing stays for five. Since 1 July 2022, a hardship arrangement is recorded differently: each repayment made under the arrangement is marked with a financial hardship flag (A for a temporary arrangement, V for a permanent variation), and if you keep to the arrangement those months are not reported as missed. Credit reporting bodies cannot use that flag to calculate your credit score, and it is removed a year later. Lenders you apply to can still see it for that year, so it is not invisible, but it is far kinder than a string of missed payments.
• Negotiating room. A lender dealing with a borrower who flags future strain has a wider menu of options than one dealing with a borrower already three payments behind.
• Fees and escalation. Missed payments can bring late fees, default interest where the contract allows it, collection calls and eventually a default notice. An agreed arrangement means you are keeping to the new terms, so that escalation does not start.
• AFCA pathway. If you go through the lender's hardship process and disagree with the outcome, AFCA is a free external dispute service. While AFCA is dealing with your complaint, the lender cannot take action to recover the debt or enforce the mortgage unless AFCA agrees in writing.

How to make the call

1. Before you call, gather the numbers. Your loan balance, current monthly repayment, household income (after tax, all sources), monthly essential expenses (housing including utilities, food, transport, healthcare), monthly non-essential expenses, and any savings buffer.
2. Ask for the hardship team by name. Most lenders also have an online hardship form. Say the words "financial hardship" so the request is logged as a hardship notice and the 21 day clock starts.
3. Be specific about what has changed. Lenders assess hardship against a change in circumstances: a rate rise plus loss of overtime, illness, separation, a major bill or a job change. The more specific you can be about the change and how long it will last, the easier the assessment.
4. Ask for a specific variation. "I need three months of reduced repayments at $X, then a review" is a starting position the lender can respond to. "I am struggling" puts the burden on them to construct the request.
5. Get the outcome in writing, including how long it lasts, what reverts at the end, what happens to the interest that accrues in the meantime, and any fees.
6. If the lender declines or offers something you cannot keep to, complain through the lender's internal dispute resolution process. If that does not work, lodge with AFCA. AFCA is free and you do not need a lawyer.

What lenders typically agree to, and what each option costs

Most major bank hardship teams will agree to a short repayment pause or a period of reduced or interest-only repayments where the borrower can show the problem is temporary and the loan will return to normal. Term extensions and capitalising arrears are usually available where the long-term affordability of the loan is not in doubt. None of these is free, and it pays to know the price before you pick one. Using the same illustrative $600,000 loan at 6.20 per cent with 25 years left:

• Three-month pause: interest keeps accruing, so about $9,350 is added to the balance and your repayments afterwards are a little higher or the term a little longer.
• Interest-only for a set period: about $3,100 a month instead of $3,939, around $840 a month of relief, but the balance does not fall while it lasts.
• Extending the term from 25 to 30 years: the repayment drops to about $3,675, around $265 a month less, but if nothing else changes you pay roughly $141,000 more interest over the life of the loan.

Those trade-offs are why a short, targeted arrangement usually beats a permanent one if your problem is temporary. What lenders usually will not agree to on a first request is a permanent rate cut or a write-off of any part of the principal. Those happen only in narrow circumstances, typically when the alternative is enforcement and the lender judges a workout to be the better path.

When to involve a financial counsellor

Financial counsellors are free, qualified and independent of lenders. The National Debt Helpline (1800 007 007) is the best front door for most situations, and Aboriginal and Torres Strait Islander people can also call Mob Strong Debt Help on 1800 808 488. A financial counsellor can sit alongside you in the conversation with the lender, help you put together a statement of your position, and refer you to legal advice or other support if your situation is more complex than a single loan.

There is no commercial relationship between a financial counsellor and a lender; the counsellor works for you. If you would benefit from someone independent in the conversation, ask. Be wary of paid "debt management" or "credit repair" firms promising a quick fix to mortgage problems. MoneySmart specifically warns against them, and everything they offer to do for a fee, a financial counsellor will do for free.

Where a broker fits, and where it does not

A broker is not a hardship service, and if you cannot meet your repayments today a new loan is rarely the answer. Where a broker can help is one step earlier: if you are still paying on time but paying well above the sharpest rates, a refinance can take pressure off before hardship is needed. The catch is that you are reassessed at roughly 3 percentage points above the new rate, on today's income and expenses, and with home values falling for five straight months your equity may be thinner than you think. If the numbers do not work, you will be better off with your existing lender's hardship team, and a good broker will tell you so.

A final note

Most borrowers who hit hardship in 2026 will not lose their home. Most will work through a temporary arrangement with the lender, return to normal repayments, and the hardship flag will drop off their file a year later. The damage is concentrated among those who did not call until they were already several payments behind. With another rate decision due tomorrow and unemployment rising, the single most useful thing a borrower under stress can do is call early. Everything else follows from that call.

Disclosure: Licensed brokers who meet our criteria pay Your Finance Guide a partnership fee to receive enquiries from this site. The fee is paid by the broker, not by you, and is not added to your loan. Brokers are usually also paid a commission by the lender when a loan settles. The two most important steps in this article, calling your own lender's hardship team and calling the free National Debt Helpline, pay a broker nothing and are still the right first moves for anyone struggling to pay. Mortgage stress, arrears, complaints and economic figures are as published by the named sources up to 28 September 2026. The RBA's 29 September decision had not been announced at the time of writing. Repayment figures are illustrative calculations on the stated assumptions, not quotes. This is general information, not personal advice.