In this article
Kooky
Builder of Shaka, the payment router that pays every agent their commission on closing date.
About Kooky and Shaka →Most people who fall behind on a home loan did nothing unusual. An employer cut hours, a relationship ended, an illness kept someone from work, a flood closed a business, or the interest rate rose three times in a year and the budget that used to balance stopped balancing. The law treats this as an ordinary risk of borrowing over 30 years, and it gives the borrower a specific right: to ask the lender to change the repayments, and to receive a proper answer.
That right is called a hardship variation. It applies to home loans across Australia under national credit law, it costs nothing to use, and lenders handle requests in large numbers. Commonwealth Bank said in its results on 12 August 2026 that it made more than 147,000 tailored payment arrangements with customers in a single year. Yet many borrowers do not know the right exists, or assume that asking will mark them as a bad risk, and wait until a default notice arrives.
This guide sets out how the process works for a home loan in Queensland: who can ask, how to ask, what the lender has to do and by when, what help can look like and what it costs, what appears on a credit report, how to challenge a refusal, and what happens if the loan cannot be saved. It describes the general rules and is not advice for a particular household.
Time limits as set out by Moneysmart, the consumer site of the Australian Securities and Investments Commission; the Australian Financial Complaints Authority describes its service as free.
Who has the right to ask
The rules sit in the National Credit Code, the federal law that governs consumer lending. It covers loans taken out by individuals for personal, household or domestic purposes, and loans to buy, renovate or refinance residential property, including residential investment property. A standard owner-occupier mortgage is covered, and so is the loan on a rental house held in a person's own name.
Related readQueensland owner-occupiers now borrow $751,000 on average, a recordUnder the Code, a borrower who is, or will be, unable to meet their obligations can give the lender notice of that fact. The notice can be given by phone or in writing. From that moment the lender has duties, set out below, whether or not it uses the word hardship and whether or not the borrower has missed a payment yet.
Banks that subscribe to the Banking Code of Practice have made further promises on top of the law. The current version of the Banking Code took effect on 28 February 2025 after approval by the Australian Securities and Investments Commission, and compliance is monitored by an independent committee. In it, banks commit to work with a customer in financial difficulty to find a sustainable solution, and to use practices that identify common signs of difficulty so that they can approach a customer first. The Banking Code describes financial difficulty broadly, naming illness, loss of work and natural disasters among the causes, the last of which matters in a state that floods and burns as regularly as Queensland.
The Australian Financial Complaints Authority, the national ombudsman for financial services, uses the same wide definition: financial difficulty is being unable to meet repayments on a home loan, credit card, personal loan or business loan, for reasons that include sickness, natural disaster, unemployment or over-commitment.
How common hardship is in 2026
A borrower who asks for help is one of many. The credit bureau Equifax recorded a 5.3 per cent rise in mortgage hardship cases in the June quarter of 2026, The Adviser reported on 4 August. The Australian Financial Complaints Authority received 119,949 complaints in 2025-26, the most in its history, with complaints about financial difficulty up 17 per cent, the same publication reported the next day.
Related readQueensland refinancing enquiries fall 8.8 per cent in a yearThe background is the cost of money. The Reserve Bank raised the cash rate three times in 2026, to 4.35 per cent, and the minutes of its August meeting record that scheduled mortgage payments, as a share of household income, had risen to near their 2024 peak.
Queensland enters this period in better shape than most. S&P Global Ratings put the share of prime home loans more than 30 days behind at 0.55 per cent in Queensland in June 2026, against 0.85 per cent nationally, in figures reported by the trade publication MPA on 28 August. That is a low number, and behind it are real households.
Equifax's commentary on its own figures, as reported by The Adviser, was that borrowers appear to be seeking assistance earlier than they once did. Everything in the process that follows works better early.
Making the request
A hardship request does not need a form, a lawyer or a particular phrase. Moneysmart's guidance is to call the lender's hardship team, give the account details, and say that repayments have become difficult. Most lenders publish a hardship phone number and an online form, and the number is usually printed on loan statements.
The lender will want three things explained: what has happened, how long it is likely to last, and what the borrower can realistically afford to pay in the meantime. A request that answers all three is easier to approve than one that only says the repayments are too high.
- Work out a budgetList income and essential spending, and arrive at a repayment that can actually be met.
- Give noticeTell the lender's hardship team, by phone or in writing, that the repayments cannot be met, and why.
- Supply what is askedThe lender may request payslips, statements or a medical certificate. Send them promptly and keep copies.
- Receive the decisionThe lender must agree to a change or refuse and give reasons, within the legal time limit.
- Keep to the arrangementPay what was agreed. If that becomes impossible, tell the lender before a payment is missed.
A written record helps at every stage. A borrower who asks by phone can follow up with an email or letter that states the date of the call and what was requested. If the matter later goes to the ombudsman, the dates matter.
Related readAugust minutes: a fourth rate rise was weighed as loan demand droppedThe request can be made by the borrower or, with the borrower's authority, by a financial counsellor. Financial counsellors work for community organisations, are free, and deal with lenders' hardship teams every day. The National Debt Helpline, on 1800 007 007, connects callers to one.
What the lender has to do, and by when
Once notice is given, the clock starts. Moneysmart sets out the timetable.
| Situation | What the lender must do | Time limit |
|---|---|---|
| Request received, nothing more needed | Tell the borrower whether it agrees to change the loan. | 21 days from the request |
| Lender asks for more information | Decide once the information arrives. | 21 days from receiving it |
| Lender refuses | Give its reasons, so the borrower can challenge them. | With the decision |
Moneysmart, "Problems paying your mortgage". The limits come from the National Credit Code.
The law does not oblige a lender to say yes. It obliges the lender to consider the request properly, to answer in time and to explain a refusal. A lender is entitled to decline where it reasonably believes the borrower could not meet the loan even with a change, or where the cause of the difficulty is not one that a change would fix. What it cannot do is ignore the request, leave it unanswered, or refuse without giving reasons.
The Banking Code adds protections while a request is open. A subscribing bank will not sell the debt to a debt collector while it is actively considering the customer's financial situation, or while the customer is complying with an agreed arrangement.
What help can look like, and what it costs
There is no fixed menu. The Banking Code gives examples of what a bank may offer, and other lenders use the same tools.
| Change | How it works | What it costs later |
|---|---|---|
| Paused or deferred payments | No repayments for an agreed period. | Interest keeps being charged and is added to the debt. |
| Reduced payments | A lower amount for a set time. | The shortfall is added to the loan. |
| Interest only for a period | Repayments cover interest, not principal. | The debt stops falling while it lasts. |
| Longer loan term | The same debt is spread over more years. | Lower repayments, more interest in total. |
Examples drawn from the Banking Code of Practice, which also allows for debt to be reduced or waived on compassionate grounds in exceptional circumstances.
The right choice depends on whether the trouble is temporary or lasting. A pause suits a borrower who will be back at work in three months. It does not suit one whose income has fallen for good, because the full repayment returns at the end, on a larger debt. For a lasting change the Banking Code speaks of alternative arrangements, which in practice means a longer term, a restructure or, where the loan cannot be made to work, time to sell.
Related readOne borrower in 50 is short each month, the RBA's stability review findsA pause on repayments is not a pause on interest
During a deferral the lender normally keeps charging interest and adds it to the balance. The loan is larger when repayments resume, so either the repayment or the term rises afterwards.
An illustration shows the scale. Assume a loan of $600,000 at 6.24 per cent. Interest runs at about $3,120 a month. A three-month pause with interest added to the balance leaves the borrower owing roughly $9,400 more than before, and that sum then attracts interest for the rest of the loan. These are illustrative figures, not a quote from any lender, and the true cost depends on the rate and how the lender treats the arrears.
A deferral is still often the right call. The alternative to a planned pause is usually an unplanned one, with default fees, a damaged credit report and a lender that has not been told what is happening.
What goes on a credit report
Fear of a black mark keeps many borrowers from asking. The rules are gentler than most expect.
Moneysmart explains that a hardship arrangement does not affect a credit score. While an arrangement is in place, the credit report shows that fact for the months concerned, beside the repayment history. The entry is deleted after 12 months if the borrower keeps to the agreement.
Compare that with what happens without an arrangement. A credit report carries two years of repayment history, month by month, showing whether each payment was made on time. Missed payments appear there. A debt of $150 or more that remains unpaid can be listed as a default, and a default stays on the report for five years.
A future lender will be able to see that an arrangement existed during those 12 months and may ask about it. That is a real consideration for anyone planning to refinance soon. But a record that shows a difficulty, an agreement and payments made under it is a better record than one that shows a string of missed payments and a default.
Related readRefinancing a home loan: the steps, the costs and the lender's checksIf the lender says no
A refusal is not the end of the process. Moneysmart sets out two further steps.
The first is the lender's internal dispute resolution team. Every lender must have one, separate from the hardship team, and a borrower can ask it to review the decision. The reasons the lender was required to give are the starting point: if they rest on a wrong figure or overlook a change in circumstances, this is where to say so.
The second is the Australian Financial Complaints Authority. It is independent of lenders, its service is free to the borrower, and lenders that hold a credit licence must be members. The authority lists the hardship complaints it can consider, and they include cases where a lender declines a request without explanation, fails to respond, issues a default notice during hardship, continues recovery action after a hardship request, or refuses help after obtaining a court judgment.
The authority's method is negotiation and conciliation. It asks the borrower to complete a statement of financial position, which sets out income, spending and debts, and it commonly arranges a conciliation conference by telephone between the borrower and a representative of the lender who has authority to settle. Many complaints end there with an agreed arrangement.
The authority cannot give financial or legal advice, and it will expect the borrower to have asked the lender first. A complaint can be lodged online, by phone or by post.
Default notices and what follows in Queensland
If repayments are missed and no arrangement is in place, the lender's first formal step is a default notice. Moneysmart explains that the notice gives the borrower 30 days to pay the overdue amount. If the arrears are paid within that time, the default is cured and the loan continues.
Related readJune minutes: mortgage payments are up, but lighter than last timeIf they are not, the lender may begin court action for possession of the property. In Queensland that means a claim filed in court and served on the borrower. The time to respond is short and is stated on the document, and Moneysmart's guidance at this point is to get legal advice straight away. Legal Aid Queensland and community legal centres give free advice on mortgage matters to people who qualify.
Three points are easy to miss at this stage.
- It is not too late to ask for hardship. A request can be made after a default notice, and a complaint to the ombudsman can be made after court proceedings have started, though the options narrow once a court has given judgment.
- Ignoring the claim hands the lender a judgment. If the borrower does not respond, the lender can obtain judgment without a hearing, and enforcement follows: a notice to vacate, and then officers of the court changing the locks.
- The lender must sell properly. Queensland property law requires a mortgagee selling under its power of sale to take reasonable care to obtain the market value. If the sale does not cover the debt and the costs, the borrower still owes the shortfall; if it produces more, the surplus belongs to the borrower after any other secured debts are paid.
Repossession is rare. The figures quoted earlier show well under one prime loan in a hundred behind by even 30 days in Queensland, and most of those are resolved long before a court is involved.
Selling on the owner's terms
Sometimes the loan cannot be made affordable. Moneysmart's view is plain: selling the home voluntarily usually produces a better outcome than a sale by the lender. The owner chooses the agent, the method and the timing, lives in the home while it is marketed, and avoids the lender's legal and enforcement costs, which are added to the debt in a forced sale.
A lender will normally agree to hold off enforcement while a genuine sale is under way. Moneysmart advises telling the lender of the decision and providing evidence: the appointment of the agent, the advertising, and the contract once there is one. A request for time to sell is itself a form of hardship arrangement and can be put in the same way.
Equity decides how this ends. A Queensland owner who bought several years ago is likely to clear the loan and keep the balance. One who bought with a small deposit shortly before prices turned may find the margin thin once agent's commission and selling costs are counted, which is the strongest reason to act while there is still a choice of when to sell.
Joint borrowers and guarantors
A joint loan makes each borrower liable for the whole debt. After a separation, one party may stop paying while the other cannot cover the repayments alone. Either borrower can give a hardship notice, and a lender dealing with family violence or relationship breakdown will usually have a specialist team; the request does not need the agreement of the other borrower to be considered.
A guarantor, often a parent who offered their own home as extra security, becomes liable if the borrower defaults. The Banking Code provides that a guarantor who is in financial difficulty after a demand has been made can ask the bank to discuss options. A borrower with a guarantor behind the loan has an added reason to raise hardship early, because the consequences reach a second household.
Lenders mortgage insurance, which many borrowers with small deposits paid for, protects the lender and not the borrower. It does not make repayments during hardship. Some borrowers do hold income protection or loan protection cover, sometimes through a superannuation fund, and a hardship period is the moment to check.
Where free help is available
No one needs to pay for help with a hardship request. Businesses that charge fees to negotiate with a lender offer nothing that the free services do not.
- National Debt Helpline, 1800 007 007. Free financial counselling. A counsellor can prepare the budget, speak to the lender and help with a complaint.
- The lender's hardship team. The number is on the loan statement and the lender's website.
- Australian Financial Complaints Authority. Free, independent dispute resolution once the lender has been asked.
- Legal Aid Queensland and community legal centres. Legal advice when a default notice or court claim has been received.
- Beyond Blue, 1300 22 46 36. Money trouble is hard on people, and the line is open at all hours.
The process rewards the borrower who starts it. A request made before the first missed payment, with a budget and a clear account of what has changed, gives the lender what it needs to say yes within its 21 days.
Kooky, from Shaka
Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.
