Australian prime and nonconforming mortgage arrears rose during the first quarter of 2023. Rising interest rates and cost-of-living pressures are weighing on debt serviceability. The cumulative effect of multiple interest-rate rises is taking effect and borrowers' savings buffers are eroding as the cost of living rises. Prime mortgage arrears rose to 0.95% in March 2023 from 0.76% in December 2022. Nonconforming arrears hit 3.70% in March, up from 3.20% in December 2022. Refinancing conditions have tempered arrears by enabling many borrowers to switch to lower mortgage rates, reducing financial stress. As interest rates continue to rise, refinancing conditions are becoming tougher for many borrowers, particularly those who are more highly leveraged. This is likely to add to arrears pressure because refinancing is a common way for borrowers to self-manage their way out of financial stress.