Brokers are reporting a sharp uptick in owner-occupiers refinancing to pull cash out of their homes. The twist: they’re not funding renovations or investment purchases. They’re covering grocery bills, school expenses and mortgage repayments themselves.
One broker network says requests to increase loan amounts during refinancing have climbed noticeably over the past six months. Some borrowers are seeking enough extra debt to fund their mortgage payments for another one to two years. Others are borrowing to cover costs they previously paid from monthly income, school fees, energy bills, essentials.
At the same time, switching to interest-only repayments and extending loan terms back to 30 years has become routine for households trying to free up monthly cashflow. The pattern suggests families are using every lever available to stay current without selling.
Who’s doing this and why
The borrowers most exposed are mid-income owner-occupiers with children in school and sizeable mortgages. Housing costs, energy bills and general living expenses now rank among the top three drivers of financial stress for the first time in over a decade of tracking data from food-relief organisations.
One in five households earning above $91,000 a year reported food insecurity in the previous 12 months. Nearly half of surveyed households said putting food on the table became harder over a single month in mid-2024. Parents are skipping meals after feeding their children, and fresh protein, fruit and vegetables are the first items cut from shopping lists.
Housing costs are the immovable expense. Families will protect shelter and electricity access before cutting food spending, which makes equity drawdowns the next logical step when monthly income no longer covers fixed outgoings.
The mechanics and the risk
Refinancing to increase your loan amount works as long as three conditions hold: you have enough equity to borrow against, serviceability buffers let you take on more debt, and property values don’t fall.
The first two are under pressure. Interest rate rises since early 2022 have compressed borrowing capacity. A further 0.25 percentage point increase adds roughly $120 a month to repayments on a $735,000 loan. For households already spending more than they earn each month, that margin disappears.
The third condition is the structural risk. Equity release only works if the home’s value stays flat or rises. If prices fall, whether from another rate move, migration slowdown or credit tightening, the equity buffer shrinks or vanishes. Borrowers who’ve drawn down equity to fund consumption are left with higher debt and lower collateral.
Unlike investment-driven equity release, where borrowed funds flow into an income-producing asset, using home equity to cover groceries or repayments means the debt funds a diminishing resource. There’s no asset on the other side generating cashflow to service the loan.
Key numbers
- 65% of surveyed Australians expect negative household impact from another rate rise
- 21% would cut spending on essentials (groceries, fuel, utilities)
- 16% would dip into savings; 13% would delay major financial goals
- 1 in 5 households earning over $91,000 experienced food insecurity in the past year
- Cash rate currently 4.35%; a 0.25pp rise adds ~$120/month to a $735,000 loan
What this tells us about the cycle
When owner-occupiers start borrowing against their homes to fund mortgage repayments, the housing market has crossed into maintenance-cost territory rather than wealth-building territory. It’s a signal that incomes, savings buffers and discretionary cuts have all been exhausted.
Historically, this behaviour clusters near cycle peaks or in the early stages of sustained affordability stress. The question is whether this is temporary, families smoothing cashflow through a difficult 12-18 months, or structural, where wage growth and household income remain durably mismatched to debt-servicing requirements.
If it’s temporary, equity drawdowns act as a bridge until rates stabilise or fall. If it’s structural, the bridge leads nowhere. Higher household debt, thinner equity buffers and rising loan-to-value ratios leave less room to absorb the next shock, whether that’s job loss, another rate move or a price correction.
Scenarios and pressure points
Base case: rates hold or ease over the next 12 months, wage growth catches up slowly, and households who drew equity can rebuild buffers without forced sales. Equity release functions as intended, a cashflow smoothing tool.
Upside: rates fall faster than expected, refinancing competition heats up, and borrowers can roll equity drawdowns into lower-rate products with improved serviceability. Pressure eases before prices fall.
Downside: another rate rise, or rates stay elevated longer than households can sustain. Equity buffers thin out, serviceability tests tighten further, and forced sales start appearing in pockets where debt-to-income ratios are highest. Prices fall in those segments, trapping recent equity drawdown borrowers with negative equity or minimal buffer.
The third scenario is the one to watch. It doesn’t require a crash, just a modest 5-10% fall in property values combined with rising debt levels among owner-occupiers who’ve already maximised borrowing capacity.
What to watch over the next six months
Refinancing volumes broken out by purpose: if equity-release refinancing for non-investment purposes keeps climbing, it confirms the trend is broadening beyond pockets of distress.
Arrears data, especially for owner-occupiers in the $500,000–$900,000 loan range. Early-stage arrears (30-60 days) will show up before forced sales.
LVR distribution in new lending and refinancing. Rising average LVRs or a shift toward 90%+ LVR refinancing signals thinning equity buffers.
Interest-only loan share among owner-occupiers. A sustained rise indicates cashflow stress, not strategic tax planning.
If you’re considering tapping equity to cover living costs, pressure-test the decision against two questions: how long can you sustain higher debt if rates don’t fall, and what happens to your equity buffer if property values drop 10%? If both answers are uncomfortable, the risk is higher than the temporary relief.
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Related reading: Falling house prices RBA rate hike calculus: equity loss versus repayment relief and Borrowing capacity falls faster than prices: the affordability trap.
General info, not financial advice.
