Mortgage stress usually means your home loan repayments take more than about 30% of your household’s income before tax, or leave too little for essentials. There is no official definition, so the 30% line is a rule of thumb: a high-income household can be comfortable above it and a smaller one stretched below it. The useful test is whether the repayment still works if rates rise again or one income drops.

The 30% test at Sydney loan sizes
Loan Monthly repayment at 6% Household income to stay under 30% Repayment if the rate rises 1%
$500,000 $2,998 $120,000 $3,327
$600,000 $3,597 $144,000 $3,992
$800,000 $4,796 $192,000 $5,322
$1,000,000 $5,996 $240,000 $6,653
$1,200,000 $7,195 $288,000 $7,984

How common is mortgage stress right now?

More common than at any time since 2008. Roy Morgan estimated that 32.3% of owner-occupier mortgage holders were at risk of mortgage stress in the three months to August 2026, about 1,718,000 people, up from 23.9% in January after the Reserve Bank raised rates in February, March and May. The record, 35.6%, was set in mid-2008. The Reserve Bank raised rates again in September 2026, after that survey.

What counts as mortgage stress?

Three tests are in common use, and it is worth checking all three:

  • The 30% rule: repayments above 30% of gross household income.
  • The 30/40 rule: households in the lowest 40% of incomes spending more than 30% on housing, a measure used in housing research because the same share hurts more on a lower income.
  • The budget test: after the repayment, essentials such as food, power, insurance and transport no longer fit without borrowing or using savings.

What are the warning signs?

  • Groceries or bills going on a credit card that is not cleared each month
  • The offset or savings balance falling every month
  • Redraw being used for everyday costs
  • Bills paid late, or juggled between pay days

None of these is a missed repayment, and that is the point: this is the stage when you have the most options.

What can you do this month?

  1. Rebuild the budget from your statements, not from memory. Lenders compare your spending with a benchmark; see HEM living expenses.
  2. Ask your lender for a lower rate. It costs nothing and is often granted to borrowers with a good repayment record; see asking for a better rate.
  3. Check whether a refinance still works. A lower rate elsewhere can cut the repayment, but the new lender tests you at its rate plus 3%.
  4. Look at the term. Extending the loan back to 30 years lowers the repayment, at the cost of more interest over time.
  5. Deal with high-rate debts. Rolling a car loan or credit card into the home loan can lower monthly outgoings, but only helps if the cards are closed; see debt consolidation.

Can you refinance your way out of mortgage stress?

Sometimes, and the window closes as stress grows. On a $600,000 loan at 6%, a new lender tests a repayment of about $4,828 a month, not the $3,597 you would pay. A household that only just covers today’s repayment may not pass that test, which is why people in stress can be stuck with a lender they would rather leave. Missed repayments make it harder again, because they show on your credit report: a repayment more than 14 days late can appear in your repayment history. The guide to the serviceability buffer explains the test, and non-bank lenders are sometimes an option when banks say no.

What if you have already fallen behind?

Call your lender before the arrears grow. You can ask for a hardship arrangement, such as a short pause, lower repayments for a period or a longer term. Under the National Credit Code your lender must respond to a hardship request, generally within 21 days, and before it can act on a default it must send a default notice giving you at least 30 days to fix it. The guide to mortgage hardship help covers what to say and what lenders ask for.

Free help outside the bank

The National Debt Helpline, 1800 007 007, puts you in touch with a free financial counsellor who can negotiate with lenders for you. If repayments are already being missed, call them as well as your lender.

Questions people ask

What is considered mortgage stress?

Usually repayments above 30% of gross household income, or repayments that leave too little for essentials. It is a guide, not a legal definition.

How do you pass a mortgage stress test?

Lenders test your repayment at their rate plus 3%. On $600,000 at 6% that is about $4,828 a month. Lower debts, a lower credit card limit and a larger deposit all make it easier to pass.

Does asking for hardship help hurt your credit score?

A hardship arrangement can be noted in your repayment history for 12 months, but months you keep to the arrangement are shown as an arrangement in place, not as missed repayments.

What is the difference between mortgage stress and mortgage hardship?

Stress is the squeeze before anything is missed. Hardship is the formal process when you cannot meet repayments, with protections under the National Credit Code.

Charles Touma reviews loans that have become tight: whether a better rate, a refinance or a restructure is still open to you, and what each would change each month. A free 30-minute call covers it. General information only, not credit advice; every loan is subject to the lender’s assessment. Example figures use the 6% example rate over 30 years. See also the rate rise calculator.

Sources: Roy Morgan, mortgage stress risk, August 2026; Moneysmart, problems paying your mortgage; National Debt Helpline, checked 21 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.