After several rate rises in a short space of time, a lot of households are discovering their repayments no longer fit the budget. If that’s you, the first thing worth saying is that you’re in large company, and the second is that there are more options than most people realise. The worst outcome usually comes from waiting too long rather than from the rise itself. Here’s the plain-language guide to what to do.
First, Know Your Actual Position
Before doing anything, get the real numbers in front of you. What’s your current rate, what’s your repayment, and what’s the shortfall between that and what you can comfortably afford? Include everything, rates, insurance, and the buffer you need for the unexpected.
The reason to do this first is that the right option depends on whether you’re facing a small gap or a large one. A $100 monthly shortfall is a different problem from a $700 one, and they call for different responses.
Option One: Check You’re Not Overpaying
Start here, because it’s the least painful and often the most effective. Lenders move rates independently of the RBA, and the gap between the sharpest rates and the ones long-standing customers quietly sit on is frequently larger than a single rate rise.
Call your lender and ask directly for a better rate, mentioning that you’re considering refinancing. This works more often than people expect, since retaining you costs them less than replacing you. If they won’t move, compare what else is available, either directly or through a mortgage broker. A meaningful rate reduction can close the gap entirely without changing anything else about your situation.
Option Two: Restructure the Loan
If a better rate isn’t enough, there are structural options worth discussing with your lender. Extending your loan term reduces the monthly repayment, though you pay more interest over the life of the loan, which can be a sensible trade if it gets you through a difficult period. Switching to interest-only temporarily lowers repayments significantly, but you’re not paying down the debt during that time.
Fixing part or all of your loan gives certainty about repayments, though it costs flexibility and you won’t benefit if rates eventually fall. If you have savings, an offset account reduces the interest charged and is worth understanding properly.
None of these are free, each has a trade-off, which is why they’re worth talking through with your lender or a broker rather than choosing blind.
Option Three: Ask for Hardship Assistance
This is the option people avoid out of embarrassment, and it’s often the most important one. Australian lenders have formal financial hardship processes, and they’re a legal obligation, not a favour.
If you’re genuinely struggling, contact your lender’s hardship team and explain the situation. Options can include a temporary repayment reduction or pause, a restructured arrangement, or other short-term relief while you get back on your feet. Crucially, asking for hardship assistance early, before you’ve missed payments, gives you far more options than asking after your loan is in arrears.
Free, independent help is also available. The National Debt Helpline (1800 007 007) provides free financial counselling, and their counsellors deal with this every day without judgement.
The One Thing Not to Do
Don’t wait and hope. The single most common mistake is staying silent while the situation deteriorates, missing payments, using high-interest credit to cover the mortgage, or dipping into money you need for other essentials.
Every one of those makes the position harder to fix, and every one of them reduces the options your lender can offer you. Lenders have more flexibility with a customer who calls before there’s a problem than one who calls after three missed payments. Early is everything.
If the Numbers Genuinely Don’t Work
Sometimes, after all of the above, the honest answer is that the property is no longer affordable. That’s a painful conclusion, but making that decision deliberately, with advice, while you still have equity and options, is a far better outcome than having it made for you later.
A financial counsellor can help you think that through clearly, and it costs nothing. Independent guidance is on the government’s Moneysmart site. This is general information, not financial advice, and your circumstances are specific.
The Bottom Line
If your repayments no longer fit, work through it in order: check you’re not overpaying and negotiate or refinance, look at restructuring the loan, and ask for hardship assistance early if you need it. Free financial counselling is available through the National Debt Helpline on 1800 007 007. The one thing that genuinely makes it worse is waiting, because every option you have shrinks once payments start being missed. Act early, ask for help, and know that this is common enough that lenders have formal processes for exactly this situation.
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