G'day.
Every second question in the landlord groups this month is some version of "why has my borrowing power gone backwards when my income went up?"
The honest answer is that three separate things are squeezing at once: APRA's macroprudential settings (unchanged again in July), the post-reform lender policies on investor loans (covered in the June piece on lender serviceability cuts), and a cash rate that hasn't moved off 4.35%. This post is about the first one — the biggest and least understood of the three.
What APRA did in July: nothing, loudly
At its July 2026 review, APRA left every macroprudential dial where it was:
| Setting | Level | Status |
|---|---|---|
| Serviceability buffer | 3.0 percentage points above the loan rate | Unchanged since Oct 2021 |
| Countercyclical capital buffer | 1% of risk-weighted assets | Neutral setting, unchanged |
| High-DTI lending cap | Max 20% of new loans at DTI ≥ 6x | Unchanged, currently under-used |
APRA's statement flagged a "volatile" risk landscape — Middle East conflict, higher oil prices, cost pressures — as the reason not to ease. Which matters, because a cut from 3% to 2.5% would lift most borrowers' capacity by roughly 6–10% overnight. That's the single biggest credit-easing lever in the country and it stayed in the drawer.
The buffer maths, in dollars
With owner-occupier variable rates sitting around 6.2–6.5% at a 4.35% cash rate, banks are assessing you at roughly 9.2–9.5%. That is about 5 percentage points above the cash rate. What it costs:
- Single borrower on $100,000: capacity at 6.5% ≈ $710,000. Capacity at 9.5% ≈ $500,000–$530,000. Gap: $180,000–$210,000 (25–30%).
- Couple on $200,000 combined: capacity at 6.5% ≈ $1.43m. Capacity at 9.5% ≈ $1.05m–$1.15m. Gap: $280,000–$380,000 (20–27%).
Note the reduction isn't linear. Higher incomes lose a smaller proportion, because the assessed living-expense floor eats a smaller share of the pie.
Fixing your rate doesn't help either: for a fixed loan, the buffer is applied above the revert rate — the variable rate you roll onto — not the fixed rate. A cheap two-year fixed does nothing for your assessment.
The DTI cap: the constraint that bites second
Banks can't write more than 20% of new lending at a debt-to-income ratio of 6x or higher. DTI counts all debt, not just the mortgage.
Couple on $200,000 with a $20,000 car loan. Max total debt at 6x = $1,200,000. Minus the car loan → max mortgage $1,180,000.
APRA noted high-DTI lending is running well below the 20% cap, so it isn't binding system-wide. But it bites early for exactly the people reading this: investors with existing mortgage debt, high earners in Sydney and Melbourne buying at the top of their range, and anyone carrying consumer debt or HECS.
HECS is quietly eating capacity
Under the marginal repayment system, with 2.8% indexation applied 1 June 2026, the 2026–27 thresholds are:
- Up to $69,528 — nil
- $69,529–$129,717 — 15c per dollar above $69,528
- $129,718–$186,050 — $9,028 plus 17c per dollar above $129,717
- Above $186,050 — 10% of total repayment income
A borrower on $100,000 with a $50,000 HECS balance pays roughly $4,571 a year — about $380 a month. At a 9.5% assessment rate that's around $40,000 of borrowing capacity gone. Worth knowing before you decide whether to make a voluntary repayment.
Five levers that actually move the number
- Kill unused credit card limits. Lenders assess the limit, not the balance. A $10,000 card with nothing on it costs roughly $30,000–$40,000 of capacity. Close it or cut the limit.
- Clear consumer debt before you apply. A $30,000 car loan at ~$600/month is worth about $65,000 of capacity at a 9.5% assessment rate. Paying it out is nearly always the right call pre-application.
- Document every dollar of income. Overtime, bonus and commission are shaded differently by every lender — some take 80% with a two-year history, some take 100%. Rental income is typically shaded to 75–80%, and a few investor policies have gone to 70% this year. Clean, complete statements are worth real money here.
- Shop lender policy, not just rate. Non-ADI lenders aren't bound by APRA's 3% and some assess at 1.5–2%. You pay for it in rate. Order your applications deliberately — each one hits your credit file.
- Consider a guarantor. A family guarantee can push the LVR under 80% (no LMI) and, with some lenders, improve the serviceability treatment of the guaranteed portion.
If you want to see what the after-tax picture looks like once interest, depreciation and rent are stacked up, run the numbers through the negative gearing calculator before you commit to a purchase price.
What I'm watching
- The October APRA review. If inflation keeps cooling and the oil shock fades, a buffer cut to 2.5% becomes live. That's the fastest route back to 2024-level borrowing capacity.
- The 11 August RBA decision. A hold keeps assessment rates near 9.5%. A cut flows through to the assessed rate roughly one-for-one.
- Investor-specific policy drift. Post-reform, lenders are still re-rating rent shading and tax add-backs on different timelines. The spread between the best and worst lender for an investor is unusually wide right now — which is an opportunity if you shop properly.
Get your file broker-ready in ten minutes
Every lever above depends on one boring thing: being able to hand a broker a complete, current picture of every property, loan, rent line and expense without spending a Saturday on it. That's the job PropAlly does.
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— PropAlly, Brisbane
General information only — not financial, tax, or credit advice. Lender and regulator policies change frequently; confirm current rules with a licensed mortgage broker before acting.
