With Australian property prices higher than ever, interest rates rising and inflation impacting the cost of living, a number of Australian property owners may be experiencing mortgage stress for the first time. 

What is mortgage stress?

Mortgage stress presents a number of different meanings, given each person and their financial circumstances is different. In broader terms, mortgage stress is defined as placing stress on household finances by increasing the amount of mortgage repayments. You will often hear the number 30% when considering mortgage stress, as spending more than 30% of your pre-tax income on mortgage repayments is determined to be a primary indicator of mortgage stress. 

Data from Digital Finance Analytics reported as of April 2022, 42.2% of mortgaged households are facing a form of mortgage stress, a trend exacerbated by the larger mortgages held by recent borrowers. 

The most obvious sign of mortgage stress is living pay cheque to pay cheque and juggling expenses in order to pay them on time. If you have recently lost your job or had your hours reduced, this can also place you or your family in mortgage stress. 

Ways to avoid mortgage stress

In order to remain a step ahead of your finances including your mortgage repayments, there are a number of ways you can avoid or eliminate mortgage stress.

Review your budget

By taking into account all earnings and expenses, there may be an opportunity to cut back on some non-essential expenses to relieve some pressure from your back pocket. If you do not have a budget, planning one is a necessary first step to help get your finances in order and avoid any unexpected expenses. 


If you are paying a mortgage on a home with three bedrooms and two bathrooms while only one bedroom and bathroom is used, you may want to consider downsizing to a smaller home to reduce your mortgage repayments. As a general rule of thumb, smaller properties are generally cheaper, and the potential lies in funnelling your equity into purchasing a new home with a corresponding lower principal. This has the potential to decrease your mortgage repayments and overall mortgage stress. 


Refinancing presents an opportunity to review your current finances in relation to your mortgage in order to get the most bang for your buck from your home loan. By refinancing your mortgage, you will be able to optimise your finances to better suit current market trends and personal financial circumstances.

Utilise offset or redraw facilities

If you have a variable rate home loan with an associated offset account, you may find relief in using these extra funds for mortgage repayments. The downside to this option is the loan term and associated interest may be increased, meaning it may take longer to pay off the mortgage. The same can be said if your loan has access to a redraw facility, meaning you may be able to withdraw funds to cover payments. 

Restructure or switch to an interest-only loan

Interest only home loans generally mean lower mortgage repayments, given there is no principal amount that is required to be paid off like a traditional home loan. It's important to note the interest rate may also be higher than a comparable principal and interest loan. You’ll also forgo building up equity in your home for that period.

Article first published June 2013 and updated by Jacob Cocciolone June 2022.