You might be earning exactly what you earned six months ago and still find that lenders will not lend you the same amount. Borrowing capacity moves for reasons that have nothing to do with your payslip.
Lenders assess your loan at your interest rate plus a 3 percentage point buffer. On a 6% loan, that means being tested at 9%. Figures are indicative only and vary by lender.
Interest rate settings, regulation, credit card limits, living expenses, existing debts and individual lender policy all feed into the number a lender is prepared to write. If you're planning to buy, refinance or invest, it's worth knowing where you actually stand before you start making property plans. Here are the factors doing the most work.
Higher Rates Reduce What You Can Borrow
Rates have been the dominant story of 2026, and every increase flows through to how lenders assess capacity. When rates rise, lenders have to consider the impact of higher repayments both now and in the future, so the amount available to a borrower falls.
On top of that, the Australian Prudential Regulation Authority requires banks and other authorised deposit-taking institutions to apply a serviceability buffer of 3 percentage points when assessing home loan applications. So a loan advertised at 6% is assessed as though you were paying 9%. It's a sensible test of whether you could absorb future increases, and it also trims your maximum borrowing figure. The current rates picture is worth reading alongside this.
High Debt-To-Income Lending Limits
From 1 February this year, APRA introduced limits on high debt-to-income lending to prevent a build-up of risky loans. The cap means banks can write no more than 20% of new mortgages to borrowers whose total debt sits above six times their gross annual income, applied separately to owner-occupier and investor lending.
This one is often misread. The cap doesn't directly reduce your personal borrowing capacity - it's a portfolio limit on the bank. But if your combined debts, including your existing mortgage, car loan, credit cards and the new loan, push you past six times your gross income, approval can become harder simply because your chosen lender has already filled its quota for the quarter.
Credit Card Limits Count Even If Unused
Multiple credit cards with high limits can pull your borrowing capacity down even if you never touch them and carry no balance. Lenders treat the total available credit as an ongoing commitment, on the reasonable basis that you could draw on it tomorrow.
If there are cards you no longer need, closing them before you apply can lift your capacity and tidy up your application at the same time.
How Lenders Estimate Your Living Expenses
The Household Expenditure Measure, or HEM, is a benchmark lenders use to estimate living costs. Your declared expenses get compared against it, and if your real spending comes in below the benchmark, most lenders will use the higher benchmark figure anyway. That's a common surprise for people who budget carefully.
Existing Debts Reduce Capacity
A car loan, a HECS-HELP balance and buy-now-pay-later commitments all get counted when a lender assesses you. Lenders look at every committed debt, not just the big ones.
Consolidating debt is sometimes an option, though it deserves a careful look. Rolling a short-term debt into a 30-year loan term lowers the monthly repayment while increasing the total interest paid over the life of the loan.
Different Lenders Reach Different Answers
Two lenders can look at the same application and arrive at materially different numbers. Some are more comfortable with self-employed income, others treat HECS-HELP debt or overtime and bonus income more generously. That variation is exactly why a knock-back from one lender is not a verdict on your position, and it's the ground a broker covers on your behalf. Our guide to home loans for self-employed borrowers is a good example of how much policy differs between lenders.
So How Much Can You Actually Borrow?
Your capacity shifts as rates, lender policy and your own circumstances change, so a number you were quoted last year is not a number you should plan around today. If a purchase is on the horizon, knowing your real position now is what lets you move with confidence when the right property appears. Our guide to how pre-approval works is the natural next step, and the strategy hub on things to ask a broker in 2026 covers what to test before you commit to anyone.
