What is the serviceability buffer?
The buffer is set by APRA, the prudential regulator, and banks apply it as a minimum. APRA raised it from 2.5 to 3 percentage points in October 2021 and has kept it there since — most recently confirming it in its May 2026 review, noting that households remain highly indebted and cash-flow pressure has grown with higher rates. The idea is simple: a borrower who could just afford today’s repayment would be in trouble after a few rate rises — exactly what happened in 2026.
How the buffer shrinks borrowing power
| Monthly capacity | Max loan at 6.49% | Max loan at 9.49% | Lost to the buffer | Reduction |
|---|---|---|---|---|
| $3,000 | $475,100 | $357,100 | $118,000 | 25% |
| $4,000 | $633,500 | $476,100 | $157,400 | 25% |
| $5,000 | $791,900 | $595,100 | $196,700 | 25% |
| $6,000 | $950,300 | $714,200 | $236,100 | 25% |
30-year principal-and-interest loan. “Capacity” is what is left after the bank’s estimate of your living costs, other debts and tax.
What banks count
- Income: base salary in full; overtime, bonuses, commissions and rental income are often shaded to 50–80%.
- Living expenses: your declared spending or the Household Expenditure Measure (HEM) benchmark, whichever is higher.
- Other debts: car loans, HECS-HELP repayments, Buy Now Pay Later and — crucially — credit-card limits (usually 3–3.8% of the limit a month), even if the balance is zero.
- Existing mortgages: also assessed at a buffered rate.
APRA’s debt-to-income (DTI) limit from 2026
From 1 February 2026, each bank may make no more than 20% of its new owner-occupier lending (and separately 20% of investor lending) to borrowers whose total debt is six or more times their gross income. Loans to buy or build new homes are exempt. It is a portfolio “speed limit”, not a hard cap on each borrower, but it means borrowing above 6× income has become harder to get.
| Gross income | Take-home / month | Debt at 6× | Repayment at 6.49% | Share of take-home |
|---|---|---|---|---|
| $80,000 | $5,323 | $480,000 | $3,031 | 57% |
| $100,000 | $6,457 | $600,000 | $3,788 | 59% |
| $120,000 | $7,590 | $720,000 | $4,546 | 60% |
| $150,000 | $9,203 | $900,000 | $5,683 | 62% |
| $200,000 | $11,678 | $1,200,000 | $7,577 | 65% |
The last column shows why the limit exists: at 6× income, the real repayment already takes 59% of a single $100,000 earner’s 2026-27 take-home pay, before the buffer is applied.
Five ways to borrow more (safely)
FAQ
What is the APRA serviceability buffer in 2026?
Three percentage points above the loan rate. APRA kept it at 3 points in its May 2026 review, so a 6.49% variable loan is assessed at about 9.49%.
How much can I borrow on $100,000 a year?
It depends on your expenses, debts and household size. As a reference, six times income ($600,000) is the threshold for APRA’s high debt-to-income limit, and many single applicants with no other debts are assessed somewhat below that at current rates.
What is the debt-to-income limit?
From 1 February 2026 banks may make no more than 20% of new owner-occupier loans (and separately investor loans) at a debt-to-income ratio of six or more. Loans for new homes are exempt.
Why does my bank assess me at a higher rate than I will pay?
APRA requires lenders to check you could keep paying if rates rose by 3 percentage points. It reduces the risk of borrowers falling behind when rates rise.
Do credit card limits reduce borrowing power?
Yes. Lenders count a monthly commitment of roughly 3% or more of the card limit, even if you pay it off in full each month.
Related home loan guides
Assumptions & sources
- RBA cash rate target 4.60%: raised 0.25 points on 29 September 2026 (the fourth rise of 2026, after February, March and May). The Monetary Policy Board announces its next decision at 2:30pm AEDT on Tuesday 3 November 2026; most bank economists expected another 0.25-point rise.
- Average owner-occupier variable rate (P&I) 6.49%: Canstar estimate once the September rise was passed on (29 September 2026), in line with RBA Table F6 — new owner-occupier variable loans averaged 6.23% in August 2026, before the rise. Canstar’s average advertised rate across its whole database was 6.75% (13 October 2026) and the lowest variable rate was 5.89% (20 October 2026).
- Fixed rates: big-four 1–2 year fixed rates ranged from 6.49% (ANZ) to 6.81% (NAB 2-year) in October 2026; the lowest fixed rate on Canstar was 5.79% (1-year).
- APRA serviceability buffer: 3 percentage points above the loan rate (kept unchanged in APRA’s May 2026 review). From 1 February 2026 no more than 20% of a bank’s new owner-occupier lending (and separately investor lending) may be at a debt-to-income ratio of 6 or more.
- LMI: indicative full-doc premiums from one lender’s table published by Home Loan Experts (updated 18 May 2026); insurers price individually and state stamp duty on the premium may apply (none in NSW).
- 5% Deposit Scheme (First Home Guarantee): Housing Australia rules from 1 October 2025 — unlimited places, no income caps; Darwin cap raised to $750,000 from 1 July 2026.
- Repayments use standard amortisation (monthly, fortnightly or weekly compounding to match the payment) with the rate held constant for the whole term; real loans calculate interest daily and rates change.