How Much the Banks Will Actually Lend You in 2026 (and Why It's Less Than You Think)

The number the bank actually solves for

A lender doesn't lend a multiple of your income. It runs a serviceability calculation: it works out your monthly surplus after an assessed mortgage repayment, your living expenses, and every other debt — and it only approves the loan if that surplus is positive (usually with a small buffer on top).

The formula, simplified, is:

Every one of those terms is calculated more conservatively than you'd expect. Let's go through the four that surprise people most.

1. The 3% serviceability buffer

This is the big one. Since October 2021, APRA has required lenders to assess your repayments at your actual interest rate plus 3 percentage points. So if you're borrowing at 6.4%, the bank tests whether you could afford the loan at 9.4%.

That single rule cuts borrowing power by roughly 20% versus assessing at the real rate. It exists to protect you (and the bank) against rate rises — but it means the repayment the bank tests is much higher than the one you'll actually pay. A $700,000 loan at 6.4% costs about $4,380/month; the bank assesses it as if it were ~$5,830/month at 9.4%.

You can see the effect directly in our borrowing power calculator — it applies the APRA buffer the same way a lender does.

2. HEM — the living expenses floor

You might track your spending and know you live lean. The bank doesn't take your word for it. It applies the Household Expenditure Measure (HEM) — a benchmark of minimum reasonable living costs, scaled by your income, your location, and the number of adults and dependants in your household.

Crucially, the bank uses the higher of your declared expenses or the HEM benchmark. So declaring low expenses doesn't help past a point — HEM sets a floor. A couple with two children has a far higher HEM than a single applicant on the same income, which is why dependants reduce borrowing power so sharply.

3. HECS / HELP debt

Your student debt isn't just a future tax — it's a current commitment on your loan application. Lenders treat your compulsory HECS/HELP repayment as an ongoing expense, deducted from your assessable income for as long as the debt exists.

In FY 2025-26 the compulsory repayment rate runs on a sliding scale, from 1% once your income passes roughly $54,000 up to 10% above roughly $160,000. On a $90,000 salary that's around 4% — about $3,600/year the bank treats as gone before it even looks at the mortgage. On larger incomes the effect is bigger. Paying off a HECS debt shortly before applying can lift your borrowing power by tens of thousands — sometimes the best-value dollar a buyer can spend.

4. Credit cards — assessed on the limit, not the balance

Here's the one that quietly costs people the most. A lender does not care that your credit card sits at a $0 balance. It assesses your card on its limit, at roughly 3.8% of that limit per month as a notional repayment (the exact factor varies by lender, but ~3.8% is the common rule).

So a $15,000 credit-card limit you never use is treated as a ~$570/month commitment. Over a 30-year serviceability calculation, that single unused card can cut your borrowing power by $30,000–$40,000. Cancelling or reducing cards you don't need is one of the fastest ways to lift your number.

A worked example

Take a single applicant, $95,000 salary, no kids, a $10,000 credit-card limit, and a small HECS debt:

• Gross income: $95,000
• Less tax, HECS, HEM living expenses, and the card's assessed repayment…
• …and assessed at the buffered rate (real rate + 3%)…

…and a typical lender lands somewhere around $480,000–$520,000 of borrowing capacity — not the "$95k × 5 = $475k" rough guess, and a long way from the "$95k × 6 = $570k" some online tools imply. Add a partner's income and the number rises, but so does HEM (two adults) — it's not simply additive.

The point isn't the exact figure — it's that four conservative adjustments stack, and they compound. Our borrowing power calculator lets you toggle each one (income type, dependants, HECS tier, card limits, LVR) and watch your number move, with a breakdown showing exactly how much each deduction costs you.

What actually lifts your number

If the figure comes back lower than you hoped, these move the needle most, roughly in order:

1. Cancel or cut unused credit-card limits. Fast, free, and often worth $30k+.
2. Clear small consumer debts (personal loans, BNPL, car finance) — each is assessed at its full repayment.
3. Pay down or pay off HECS if you're close to clearing it.
4. Add a co-borrower's income — but model the HEM increase too.
5. Extend the loan term to 30 years if you're on a shorter one — lowers the assessed monthly repayment.
6. Wait for rate cuts. When the RBA cash rate falls, the buffered assessment rate falls with it, and everyone's borrowing power rises in lock-step.

The bottom line

The banks aren't being difficult — they're following APRA's rules and their own risk models, and most of it exists to stop you over-committing. But it means your real budget is set by a serviceability calculation, not a salary multiple. Before you fall in love with a listing, run your genuine borrowing power with the buffer, HEM, HECS and card limits applied — then shop under that number, not over it.

Frequently asked questions

Does the 3% buffer ever get waived? Rarely, and only in tightly defined cases. APRA allows lenders to use a lower buffer for certain refinances (so borrowers aren't trapped in a "mortgage prison" where the buffer stops them switching to a cheaper rate), but for a new purchase you should assume the full 3 percentage points applies. It is the single biggest constraint on your capacity in 2026.

Why does my partner's income not double our borrowing power? Because expenses scale too. Two adults carry a higher HEM living-expense benchmark than one, and if you have dependants the benchmark rises again. Joint applications usually lift capacity meaningfully — just not by simply adding the two solo numbers together. Model it with both incomes and the correct household size.

Is it true that buy-now-pay-later affects my loan? Yes. Lenders increasingly treat BNPL facilities (Afterpay, Zip and similar) like any other credit line — the limit counts as a commitment even at a zero balance. Closing unused BNPL and store-card accounts before you apply is in the same fast-win category as cutting credit-card limits.

How much does one rate cut add to my borrowing power? Roughly speaking, because the assessment rate moves with the cash rate, a 0.25 percentage-point cut lifts most borrowers' capacity by around 2–3%. A full 1% of cuts across a cycle can add tens of thousands to what you can borrow — without your income changing at all. This is why capacity tends to rise market-wide when the RBA eases.

Will a pre-approval tell me my real number? A pre-approval is closer to the truth than any online estimate because the lender applies its actual policy, but it's still conditional — the final figure can change at full assessment once the lender verifies your documents and the specific property. Treat pre-approval as a strong guide, not a guarantee.

Borrowing power estimates are general information only, not a loan offer or financial advice. Every lender's policy, HEM table, and buffer application differs. Confirm your actual capacity with a licensed broker or your lender before making an offer.