What are your options if you can’t afford to repay your mortgage?

Written by Laura de Zwaan, Senior Lecturer, School of Accountancy, Queensland University of Technology

After just three rate cuts in 2025, interest rates have risen again ^[1] in Australia this year. It’s unwelcome news for many borrowers – particularly those still struggling with the increasing cost of living ^[2].

Currently, the average new loan size ^[3] for owner-occupied homes is about A$736,000. On a 30-year mortgage this size, an increase ^[4] of 0.25 percentage points in the official cash rate could mean paying about $120 more each month.

When assessing home loan applications, lenders are required by law to check a borrower could still make their repayments if interest rates were to rise by a certain amount. This “serviceability buffer ^[5]” is currently three percentage points.

Across the country, borrowers are showing remarkable resilience. At Commonwealth Bank, for example, Australia’s largest mortgage lender, latest results show 87% of home loan customers ^[6] are ahead of their scheduled repayments.

That offers little comfort to other households already struggling to make ends meet who may not be able to find the extra money required to meet increased repayments.

So, what options are available when homeowners can’t stretch their budget any further?

Ask for help

If you’re experiencing mortgage stress, the first step should always be to talk to your lender – as soon as you realise you are not going to be able to make a payment, or if you have missed a payment.

In Australia, consumer protection laws ^[7] mean you can ask your lender for financial hardship assistance ^[8], which can come in a few different forms.

It may be able to offer a pause on repayments for a short period, or negotiate reduced repayments for a few months.

However, this sort of assistance is aimed at helping with a short-term problem. If your mortgage repayments are unaffordable for the foreseeable future, you will need to look at other options.

Longer-term options

Your lender can help identify if there are other ways it can help reduce your repayments.

One option may be extending your loan term to reduce the repayments for the rest of the loan. A lender could also consider moving you into another product, such as an interest-only loan, to lower repayments.

You can also apply to access your superannuation on compassionate grounds ^[10], to prevent foreclosure or the forced sale of your home.

Further assistance may be available in certain jurisdictions. For example, if you are in Queensland ^[11] or the Australian Capital Territory ^[12], you might be able to access mortgage relief through state government schemes.

Looking at the bigger picture

If your mortgage is still unaffordable, and you want to keep your home, then you will need to cut back in other places to afford your repayments in the long term.

There are many guides ^[13] to help get you started on finding ways to reduce your expenses.

If a particular household bill is of concern, you can also talk to utilities providers about your financial hardship and see if you can pay these bills in instalments.

Depending on your situation, there could be other options to help keep up with repayments, such as renting out a spare bedroom or parking space.

Selling a home

If you cannot manage your repayments, it might be time to consider selling. Generally, you will get a better price for your home if you sell it, rather than letting the bank take possession and selling it to recover any outstanding loan balance.

Again, it’s important to talk to your lender as it can arrange hardship assistance that allows you time to sell.

It’s important to act early

If you are struggling financially, your best bet is to talk to your lender. Ignoring your mortgage repayments will not make them go away, and will make your situation worse.

Early communication with your lender ensures it is aware of your financial hardship and can provide advice on how best to proceed.

You are not the first person to suffer financial stress, and you should know you are not alone. In 2024–25, there were more than 280,000 financial hardship notices ^[15] (borrowers advising lenders they were struggling).

Lenders know your circumstances can change, so use your legal right to ask for support to help you manage your mortgage stress.

Help is available

If you or someone you know is in financial distress, support is available:

The National Debt Helpline ^[16] provides free advice on how to manage your debt, and you can talk to a financial counsellor about your situation. The counsellor can help with budgeting and can also provide advocacy services to help you manage your debts.
For First Nations people, Mob Strong ^[17] can provide legal advice and financial counselling.
The Financial Rights Legal Centre ^[18] has tools to help you manage your debts and can provide free financial counselling or legal help.
The Australian government’s MoneySmart ^[19] website has straightforward information on what to do if you are struggling with your mortgage repayments ^[20]. It also has information and tips on all other aspects of personal finance, including superannuation and insurance.