RBA rate rise: What happens when you can't afford to pay your mortgage?

Reserve Bank of Australia governor Philip Lowe may have apologised for forecasts that interest rates wouldn't budge until 2024, but an official sorry doesn't help those left with a mortgage they can't service.

Before you panic, we spoke to an expert to decipher the jargon for a step-by-step process of what can happen.

Lenders have to follow a specific set of steps before they can take your house.

1. Default notice

Your lender will send a default notice the day your repayment becomes overdue. This notice gives you 30 days to make the payments you've missed, as well as the regular repayment on your loan.

You can still apply for a hardship variation at this stage. More on this below.

2. After the 30 day default period

Your lender can serve you with a 'statement of claim' or a summons.

This is the of start legal action against you to claim the whole amount of your home loan. You should get legal advice now.

You can file a defence or lodge a dispute with a dispute resolution scheme. The number of days you have to do this depends on which state or territory you live in.

If you do nothing, your lender can take action to repossess your home.

3. Eviction

If your lender gets a court order to repossess your home they will send you a notice to vacate or a sheriff's letter.

A sheriff (or bailiff) will come to your home, evict you from the premises and change the locks.

This does not release you from the obligation to pay your loan. Your lender may sell your home and recover any outstanding balance by taking further legal action. This can include making a claim to sell your other assets.

Financial counsellor Kirsty Robson said financial stress was confronting, and she urged people not to ignore the problems and seek help as early as possible.

"The longer this process is going on for, the fewer options that are available," she said.

Ms Robson is among the team of financial counsellors on the National Debt Helpline for Consumer Action Law Centre, where mortgage stress has become the top issue in recent months. It used to be credit card stress.

If you've missed a repayment, or know you can't afford the next one, call your lender straight away and ask to speak to the hardship department, she advised.

Under the National Consumer Credit Protection Act you have the right to request any variation to your credit contract that you might need in order to meet your obligations.

When you call your creditor for help make sure you use the word "hardship" or say "I'm in financial hardship" to help get you through to the right person.

"You have the right to ask for hardship, and that hardship can really look like anything," Ms Robson said.

"Tell them what's going on, you need to give them some context so that they can understand why you're in financial hardship."

Be specific about what kind of help you need, rather than asking what they can do for you. Creditors should be flexible to what you need because hardship will look different for everyone.

Make sure you negotiate what's going to happen with the payments you missed at the end of the hardship period. This is called your arrears.

The answer to this is different for every person and their circumstances.

"You don't want to be in a hardship arrangement for a long time and have that eating into the equity of the property," Ms Robson said.

"The longer you have the mortgage on hold, the less you own of the property. Then, you end up selling and you've actually lost out by waiting that time. It's about finding the balance."

It is about working out when your mortgage is no longer serviceable.

"They're hard conversations to have because nobody wants to sell their house, and it can take a lot of consideration. It's definitely not a decision you should make overnight," Ms Robson said.

If you sell the property and there's debt leftover, that's called a shortfall debt.

This type of debt is known as unsecured, this is as opposed to your mortgage where your home was the security.

Other assets you own can be at risk with an unsecured debt.

There are a number of options, such as a waiver or bankruptcy.

Some people in financial difficulty often leave it quite late to ask for help.

"Being in financial stress is a massive impact on your health and there is a bit of a shutdown, and when that happens the situation gets worse and your capacity to make a decision about it gets taken away from you," Ms Robson said.

Call your lender as soon as you know you're having difficulty servicing your mortgage, they do have a requirement to support you if you ask, but they need to know you're in trouble.

The National Debt Helpline offers free, confidential, independent advice from qualified financial counsellors.

"We can go through what your rights and options are and work out what a good strategy is going to be to move forward," Ms Robson said.

"If you're really having a hard time getting a reasonable and timely response from your bank you should definitely call the National Debt Helpline so we can talk to you about how to escalate that and where to go."

Find out more at ndh.org.au or call them on 1800 007 007.