Patricia makes sure her cats are properly fed, but rarely spends much money on herself.

“I’m scrimping as much as I can, and I’ve sold a few household items to try to meet my mortgage repayments,” the 68-year-old says.

“I don’t go shopping for clothes, and I don’t go shopping for shoes, and I don’t buy makeup.

“I do like to get a haircut every six weeks, and I like to get a nice haircut.”

That small luxury may be the next item to be cut from Patricia’s budget as she tries to catch up on her latest mortgage repayment, equal to about half her pension.

Patricia, who lives in regional Victoria and asked for her surname not to be published, is one of a growing number of mortgage holders who have asked their lender for help, only to be left frustrated.

“They just want me to sell the house and go and live in a unit or retirement village or something, but I don’t want to do that,” says Patricia, who has more than 80% equity in her house.

“I don’t have much left to sell. I did sell my mower because I’m not well enough to do the lawns any more, but now I’ve got to pay someone to do it.”

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Falling behind

Australians are falling behind on their mortgages in increasing numbers, as a prolonged period of elevated interest rates and relentlessly high living costs erodes saving buffers.

ANZ disclosed on Friday in its annual results that “past due” loans – meaning customers have fallen more than 90 days behind on repayments – are up 47% to $4.17bn. This is also significantly higher than pre-pandemic levels.

There is little imminent relief on the horizon, with the Reserve Bank opting against a rate cut this month given underlying inflation remains above its target range.

All the major lenders are now reporting heightened levels of hardship variations, which can result in the lender agreeing to a temporary pause in repayments, or redesign of a loan.

But Claire Tacon, the assistant director of financial counselling at the Consumer Action Law Centre in Melbourne, says that at the exact moment mortgage holders need help, lenders are letting them down.

“So often it’s just a cookie-cutter approach,” Tacon says.

“They’re not offering tailored assistance to their customers. Too often people come through the period of their hardship variation, and then they’ve got this increased pressure to suddenly pay more, which defeats the whole purpose of a variation.”

She says most lenders offer customers a three-month moratorium on repayments when a hardship variation is requested. But she says the debt then accumulates, plunging the mortgage holder back into financial stress after the reprieve ends.

“It’s just setting people up to fail,” Tacon says.

“The people we’re talking to are facing the very real chance of becoming homeless as they can’t keep their mortgage repayments going.”

The experience is in keeping with a May report from the corporate regulator which found that 40% of customers who received hardship assistance through a reduction or deferral of payments fell into arrears straight after the assistance ended.

More tailored responses could involve having payments frozen during a moratorium capitalised to the loan, rather than creating a new debt that must be promptly paid. The mortgage duration could also be extended to reduce repayment amounts.

Australia’s major banks have consistently defended their approach.

Westpac said on Monday that while most customers were showing resilience, it was “well positioned to provide support to those who need it”. National Australia Bank said on Thursday it had an “expanded range of hardship support options”.

ANZ said its team “stands ready to help those who are doing it tough with tailored solutions”.

At its recent annual general meeting, the Commonwealth Bank said it had “initiated 132,000 tailored payment arrangements, and are continuing to offer help, such as flexibility with loan repayment deferrals, customised payment arrangements, and in some cases a loan repayment pause if required”.

Repayment holiday

Lenders are obliged to consider all hardship requests, although they are not required to agree to them. Complaints processes are available to mortgage holders should they get knocked back.

The financial complaints authority said in August that complaints involving financial difficulty increased 14% in 2023-24. Home loan disputes accounted for about one-third of those complaints.

Patricia, who is being helped by the Consumer Action Law Centre, says the response from her bank has been underwhelming.

She was given a short repayment holiday, but had to pay the accumulated debt back shortly after the reprieve ended.

She has now asked for the loan term to be extended to reduce the repayments, but has been rejected.

“I can’t make this month’s repayment,” she says. “I’ve got four kitty cats, and they won’t get a job.

“At least I still have a sense of humour, so don’t think that I’m going to throw in the towel just yet.”