Mortgage Stress: Warning Signs and Hardship Options

Mortgage stress is pressure on a household’s ability to meet home loan repayments while paying for everyday needs. For a broker, mortgage hardship assistance starts with the next payment, the client’s available money and contact with the existing lender’s hardship team.

A client can need help before missing a payment. Your role is to help them explain the difficulty and pursue an affordable arrangement. The lender decides what assistance it can agree to.

Recognise Mortgage Stress and the Immediate Need

Recognise mortgage stress by comparing the client’s upcoming repayments with their income, living costs and available cash. Watch for repeated use of savings, borrowing to pay bills or a known income reduction that makes the next payment unaffordable.

Mortgage arrears are overdue repayments. A client who is current today can still face a foreseeable shortfall next month. Conversely, a missed payment might start with an administrative problem, so establish what actually happened.

Use this order when a client discloses repayment difficulty:

1. Establish the next repayment amount and due date. Note any overdue amount separately.
2. Work out the money available before that date. Deduct necessary living costs and other commitments from expected income, and identify accessible savings.
3. Identify what changed. Record whether income has fallen, expenses have risen or a one-off event has disrupted payments.
4. Ask whether the client has received an urgent lender or court notice. Follow the mortgage default notice guide for notice-specific action.
5. Agree who will contact the lender’s hardship team and when. Arrange contact before the expected missed payment, with the client’s authority if you act for them.

At this checkpoint, your notes must show the payment date, the expected shortfall and the person making contact. Don’t postpone the hardship request while collecting a complete refinance application.

What Does a Mortgage Stress Percentage Tell You?

A mortgage-payment percentage shows how much income goes towards repayments. It doesn’t account for every household’s living costs, dependants or savings.

For example, a hypothetical household with $8,000 monthly take-home income and $2,800 repayments spends 35% of that income on the mortgage. With $5,500 of other necessary costs, it has a $300 monthly shortfall. The shortfall, and any savings available to meet it, tells you more about the immediate need than the percentage alone.

Always label the income basis when using a percentage. A calculation using gross income gives a different result from one using take-home income. A threshold used in a survey isn’t a universal test of whether your client can afford their loan.

Prepare the Assistance Request

Prepare a hardship request with the client’s repayment difficulty, current finances and a proposed payment they can afford. Obtain their consent before contacting the lender or sharing documents on their behalf.

The Australian Securities and Investments Commission (ASIC) Moneysmart mortgage guidance, updated 9 September 2026, starts with the lender’s hardship officer. The request identifies the loan, explains the difficulty and states how long it is expected to last.

Help the client assemble the information the lender needs:

• Loan account details, scheduled repayments and any overdue amount.
• Current income and evidence of a recent change, such as reduced hours.
• Living expenses, other debts and available savings.
• The amount the client can pay during the difficulty and the expected recovery date, if known.
• Supporting evidence the lender requests, limited to what the request needs.

A client can contact the hardship team before all supporting documents are ready. Record the date of that contact and any later information request.

As at October 2026, ANZ’s hardship process accepts online or telephone applications and allows a nominated person to apply. ANZ asks about income, expenses and debts. Use its required authority process when representing an ANZ client.

Finish preparation by having the client read the factual summary. Confirm the proposed payment matches their budget and that they approve the information being sent.

Explain Possible Arrangements

Possible hardship arrangements change the amount, timing or term of repayments on the existing mortgage. The lender assesses the client’s circumstances before agreeing to an arrangement.

Arrangement	What changes	What the client must understand
Temporary reduced repayments	The client pays an agreed lower amount for a defined period	The later schedule must deal with amounts deferred during that period
Repayment pause or holiday	Agreed repayments stop temporarily	A pause doesn’t itself cancel the debt or stop interest
Loan term extension	The remaining debt is repaid over a longer period	Lower regular repayments can mean more interest over the loan’s life
Temporary interest-only payments	Payments cover interest without reducing principal during that period	Principal remains outstanding and later principal-and-interest repayments can rise

As at October 2026, ANZ’s home loan repayment support describes reduced payments, a temporary payment break and possible restructuring. That page excludes ANZ Plus products. ANZ assesses the financial position and discusses how payments resume.

As at October 2026, Westpac’s mortgage support guidance lists short-term deferral, repayment reduction and extending the loan term. Westpac customers who miss a mortgage payment or expect difficulty can apply online or call Westpac Assist on 1800 067 497.

A repayment holiday is an agreed arrangement. Cancelling a direct debit doesn’t create one. Until the lender confirms a change, the existing payment obligations remain relevant.

Explain the Cost After Relief Ends

Interest can continue during a pause and increase the amount owed. Ask the lender’s hardship team to explain whether interest or fees change and how deferred amounts are handled.

Have the client obtain the revised schedule in writing. It must show the relief period, required payments, treatment of arrears and what happens afterwards. Where future repayments rise, compare them with the client’s expected income before accepting the arrangement.

For a hypothetical $400,000 balance at an unchanged 6% annual rate, one month’s interest is approximately $2,000 using a simple monthly calculation. A full payment pause can therefore increase the balance even when the lender accepts the pause. Actual interest depends on the contract, daily balances and the agreed treatment of interest.

Keep the Lender Summary Factual

Describe the financial effect of an illness or other personal event without sending unnecessary medical detail. The following is a hypothetical summary approved by the client before sharing:

The client’s work hours reduced in September. Their monthly take-home income is now $4,200, with $3,000 needed for living costs and other commitments. They request payments of $1,200 a month for three months, followed by a review before the arrangement ends. The current mortgage repayment is $2,100. Please explain the treatment of the deferred amounts and the repayments required after the arrangement.

The summary requests consideration. It doesn’t promise that the lender will accept the amount or duration.

Follow Up and Escalate

Follow up by recording the hardship request, information supplied and the lender’s written response. If assistance remains unresolved, help the client access financial counselling or the lender complaint process.

Keep a dated log of telephone calls, submission references and documents. Record what the lender asks for and when the client supplies it. Distinguish a receipt acknowledging the request from a decision accepting an arrangement.

Moneysmart’s mortgage guidance says lenders must respond within 21 days, with a response within 21 days after requested further information is provided. Track the actual information dates instead of treating this like a new loan’s approval queue.

Use the Hardship Complaint Timeframes

ASIC’s Regulatory Guide 271, paragraphs 271.92 to 271.94, treats complaints involving hardship notices as urgent. The guide sets a maximum of 21 calendar days, with additional time where further information is needed.

For contracts entered into on or after 1 March 2013, the period can be up to 28 calendar days from the information-request date if the information isn’t received. If it is received, the period is up to 21 calendar days from when the lender considers it has the requested information. Record the request and receipt dates so the applicable period can be identified.

If the client disagrees with a refusal, record the lender’s reasons and the client’s concern. Help them complain to the lender’s internal dispute resolution team, which handles complaints within that lender. This is separate from your brokerage’s complaint procedure.

If the lender doesn’t resolve the complaint within the applicable timeframe, RG 271 directs referral to the Australian Financial Complaints Authority (AFCA). AFCA provides free dispute resolution for financial complaints. An urgent notice needs immediate notice-specific help, rather than waiting for the routine follow-up date.

Connect the Client With Free Help

The National Debt Helpline’s home loan guidance helps people consider affordable repayments and other ways to manage mortgage difficulty. Call 1800 007 007 for free financial counselling. A counsellor can assist with the wider debt position when pressure extends beyond the mortgage.

For Victorian clients, Consumer Affairs Victoria’s funded-service list includes Mortgage Stress Victoria. Its service combines financial counselling, legal advice and social work for mortgage-related financial hardship. Government-funded counselling is different from a payment that clears mortgage arrears.

Before closing your follow-up, confirm the client has the written arrangement or complaint reference, understands the next payment and knows who to contact. If a proposed arrangement is already unaffordable, raise that problem with the hardship team before the client agrees.

Respond to Financial Vulnerability

Ask clients experiencing financial vulnerability what support and communication they need. Vulnerability can involve illness, financial abuse or difficulty understanding documents, even when repayments are current.

Use a private conversation to agree a safe contact channel and suitable times. Ask whether the client wants an interpreter or an authorised support person. Where financial abuse is disclosed, avoid sending sensitive information through a shared email account without confirming it is safe.

Record consent, the support requested and the referral agreed. Write an operational note such as “Client requests telephone explanations before written decisions”. Detailed diagnoses or a history of personal trauma usually add nothing to that instruction.

The Office of the Australian Information Commissioner (OAIC) collection guidance limits covered organisations to information reasonably necessary for their work. Collecting sensitive information usually requires consent. Its consent guidance explains that consent must be current and specific.

Use the minimum information needed for the assistance request. If the lender requests further sensitive evidence, explain its purpose to the client and obtain the appropriate authority before sending it.

Can a New Loan Help With Mortgage Hardship?

Yes, a new loan can help when the replacement debt is affordable and suits the client’s needs. A lower advertised repayment alone doesn’t establish that refinancing improves their position.

Hardship assistance changes payments on existing debt. Refinancing replaces that debt with a new contract and requires a fresh assessment of the client’s finances.

Under ASIC’s responsible lending guidance, credit assistance requires reasonable enquiries and verification of the client’s financial position. The broker assesses whether the proposed contract is not unsuitable. Apply the responsible lending process before recommending new borrowing.

Compare the interest rate, remaining term and repayments with the existing mortgage. Include switching costs, any fixed-rate break costs and the interest over the proposed term. If unsecured debts enter the mortgage, explain that the home now secures those debts.

Compare Relief With Replacing Debt

Consider a hypothetical client owing $400,000 with 20 years remaining at 6%. Principal-and-interest repayments are approximately $2,866 a month, with approximately $287,774 interest over that term.

Refinancing the same balance at 5.5% over 30 years reduces the monthly repayment to approximately $2,271. Yet interest over that longer term is approximately $417,616. The lower monthly payment costs approximately $129,842 more in interest under these assumptions.

These calculations assume unchanged rates, monthly payments and no fees, extra repayments or offset balance. They illustrate term-extension risk and don’t predict an offer or approval. Compare a lender’s actual assistance proposal with an actual refinance proposal on their full terms.

If a new loan is genuinely worth assessing, Bulma’s Policy Advisor can help you compare lender rules on credit history and income evidence. Its answers quote the lender policy, which you can retain with your assessment notes. You still make the suitability assessment, and the lender decides whether to approve the loan.

When the client has an ongoing income shortfall, another loan can add cost without fixing that shortfall. Connect them with financial counselling and pursue the existing lender’s assistance process while assessing any realistic longer-term option.

Australian Context and Limits of Stress Statistics

Australian mortgage stress statistics describe a population using a specified measure. Use the source’s date and definition before applying a national result to an individual client.

The Reserve Bank of Australia’s (RBA) October 2026 Financial Stability Review estimates around 2% of variable-rate owner-occupier borrowers have a cash flow shortfall. Its definition compares income with scheduled mortgage repayments and spending on essentials. This is an estimate for that borrower group, not every Australian household or every type of mortgage.

The RBA reports that housing-loan arrears remain low despite a recent increase. Arrears measure loans behind on repayments, while its cash flow measure can identify pressure before a payment is missed. Neither establishes that a particular client is coping.

The Australian Bureau of Statistics (ABS) June 2026 living cost release reports a 1.5% quarterly increase for employee households. Mortgage interest charges rose 8.2% over the quarter. Employee households are those whose main income comes from wages and salaries.

Those figures measure changes in the cost of the group’s spending, rather than the percentage of mortgage borrowers unable to pay. They explain how mortgage interest and everyday costs can put pressure on the same budget.

A suburb-level estimate also depends on the households sampled, the period covered and the definition used. Don’t label an individual client distressed because their postcode appears in a high-stress suburb list. Start their assistance request from their verified income, expenses, debt and next payment date.