Borrowing power in 2026 is shaped by a combination of regulatory settings, lender policy changes and individual financial circumstances. Two major forces are influencing loan assessments this year: the APRA Debt‑to‑Income (DTI) cap and the continued use of the 3% serviceability buffer. Together, these factors determine how much Australians can borrow, regardless of their deposit size or repayment history.
Understanding how these rules work is essential for home buyers, refinancers and investors navigating the 2026 lending environment.
APRA’s Debt‑to‑Income (DTI) Cap
From 1 February 2026, APRA introduced a formal DTI limit requiring banks to restrict high‑DTI lending to no more than 20% of new mortgages each quarter (APRA 2025). A high‑DTI loan is defined as total debt equal to or greater than six times a borrower’s gross annual income.
This means that even if a borrower meets all other lending criteria, their application may be declined if the lender has already reached its quarterly allocation of high‑DTI loans (Australian Property Investment 2026).
Example: A household earning $150,000 per year reaches the DTI threshold at $900,000 of total debt (Australian Finance Directory 2026).
The 3% Serviceability Buffer
Lenders must continue to assess all new loans at 3% above the actual interest rate, or at a minimum floor rate (commonly 5.25%), whichever is higher (JMD Mortgages 2026). With many variable rates sitting around 6.0–6.3% in early 2026, borrowers are typically assessed at 9.0–9.3%.
This significantly reduces borrowing capacity compared with the repayments borrowers will actually make.
Example: A borrower earning $120,000 may qualify for approximately $550,000 when assessed at 9.3%, compared with around $710,000 at the actual rate (JMD Mortgages 2026).
How Lenders Calculate Borrowing Power
While APRA sets the regulatory framework, each lender applies its own internal assessment model. Key components include:
- Gross income (salary, self‑employment, rental income)
- Existing liabilities (credit cards, HECS‑HELP, personal loans, car loans)
- Living expenses benchmarked against the Household Expenditure Measure (HEM)
- Loan term and interest rate
- DTI ratio
- Assessment rate (actual rate + 3%)
Borrowing power is determined by whichever constraint is reached first. For many borrowers in 2026, the serviceability buffer is the limiting factor, while for investors and higher‑income earners, the DTI cap is increasingly binding.
Impacts on Borrowers in 2026
Different borrower groups are affected in different ways:
- Investors with multiple loans are more likely to hit the DTI cap.
- First home buyers are more affected by the serviceability buffer.
- Refinancers may find it difficult to switch lenders if their assessed borrowing power has fallen since their original loan was approved.
- High‑income earners may still be restricted if their lender has reached its high‑DTI quota for the quarter.
Ways to Improve Borrowing Power
Although lenders must comply with APRA rules, borrowers can take steps to strengthen their position:
- Reduce credit card limits
- Close or consolidate smaller debts
- Increase income (overtime, rental income, secondary employment)
- Choose lenders with more favourable treatment of expenses or rental shading
- Consider non‑bank lenders, which are not bound by APRA’s DTI cap