Every home loan in Australia comes with a legal right that most borrowers never use: you can tell your lender you are in financial hardship and ask it to change your repayments, and it must respond within 21 days. With the cash rate at 4.60%, all four major banks tipping a rise to 4.85% at the RBA meeting on Tuesday 3 November, and Experian reporting a 7.3% jump in home loan accounts showing repayment strain in the first half of 2026, mortgage hardship is no longer a niche topic. This guide covers how a hardship request works, what lenders can offer, and how it shows up on your credit file.
What counts as mortgage hardship?
Mortgage hardship means you can’t meet your repayments right now but expect to be able to in the future, or would be able to with a change to the loan. Common triggers include job loss, reduced hours, illness, a relationship breakdown, a new baby, or repayments rising faster than income after a run of rate increases.
You don’t need to have missed a payment to qualify. The right sits in section 72 of the National Credit Code, and you can make the request verbally or in writing. Lenders bound by the Banking Code of Practice also commit to working with customers in difficulty, and many have dedicated hardship teams separate from the standard call centre.
What a rate rise to 4.85% could add to your repayments
On a $600,000 loan over 30 years, a 0.25% rise from 6.50% to 6.75% lifts the principal and interest repayment from about $3,792 to $3,892 a month. That is roughly $99 extra each month, on top of the increases already passed on this year. These figures are illustrative; your actual change depends on your rate, balance and remaining term.
For a household already stretched, $99 can be the difference between coping and falling behind. PRD’s latest figures show repayments now take a record 50.9% of family income on average, so the margin for absorbing another rise is thin for many borrowers.
How to make a hardship request to your lender
Contact your lender’s hardship team, explain what has changed, and say clearly that you are requesting financial hardship assistance. Using those words matters, because it puts the request on a formal footing with legal response times. Keep a record of the date, the person you spoke to, and any reference number.
The lender then has 21 days to respond. If it needs more information, such as payslips, bank statements or a medical certificate, it can ask for that within the same 21 days. Once you provide it, the lender has another 21 days to decide. Expect to complete a budget showing your income and expenses, so having three months of statements ready speeds things up.
This process is not always handled well. AFCA’s 2025-26 annual figures show home loan complaints rose 21% to 7,014, with unanswered hardship requests the top issue. If your lender doesn’t respond within the required time, or you disagree with its decision, you can lodge a free complaint with the Australian Financial Complaints Authority.
What lenders can offer under a hardship arrangement
Hardship arrangements are temporary and tailored, and each lender decides what fits your situation. The most common options are a short repayment pause, reduced repayments for a set period, a switch to interest-only repayments, or extending the loan term to lower the monthly amount.
Each option has a cost. Interest keeps accruing during a pause or reduced-repayment period, and unpaid interest is usually added to the balance. On the same $600,000 loan at 6.75%, switching to interest-only for six months would cut the repayment to about $3,375 a month, saving around $517 monthly, but the balance would not fall during that time. Extending the term lowers repayments too, though it adds interest over the life of the loan.
Will a hardship arrangement hurt my credit file?
Since July 2022, an agreed hardship arrangement is recorded as financial hardship information on your credit report instead of as missed payments. It stays visible to other credit providers for 12 months and isn’t used to calculate your credit score. Missed payments with no arrangement in place can be reported as late once they are 14 days overdue, which tends to cause more damage when you next apply for credit.
Options to consider before hardship
Hardship suits a short-term shock with a clear end date. If the pressure is ongoing, other steps may work better. A cheaper rate from your current lender, a longer term, or refinancing to a lower rate can reduce repayments without a hardship flag, provided you still meet the new lender’s serviceability test, which assesses you at the loan rate plus a buffer of at least 3%.
Money in an offset account or redraw can also cover a gap, though redraw limits vary and some lenders can restrict access. If you are behind on several debts, the National Debt Helpline (1800 007 007) offers free financial counselling. A counsellor can help you prepare a hardship request, and for personal circumstances like these it is worth getting independent advice before committing to a new arrangement.
The timing of a request matters more than its wording. Lenders have more options before arrears build up, and an early conversation about mortgage hardship usually leaves more of your choices intact than a late one.
Key Takeaways
- Under the National Credit Code, you can ask your lender for hardship help verbally or in writing, and it must respond within 21 days.
- A 0.25% rate rise adds about $99 a month to a $600,000, 30-year loan at 6.50%.
- Hardship options include repayment pauses, reduced repayments, interest-only periods and term extensions, and interest usually keeps accruing.
- An agreed hardship arrangement shows on your credit report for 12 months but doesn’t count as missed payments or affect your credit score.
- If your lender doesn’t respond in time, you can lodge a free complaint with AFCA.