By Jason Given · April 2026 · 5 min read
When you apply for a home loan, the lender does not assess whether you can afford repayments at the actual interest rate. They assess whether you can afford repayments at a rate 3 percentage points higher. This is the APRA serviceability buffer — and it is the single biggest constraint on borrowing capacity in Australia right now.
If your loan rate is 6%, you are assessed as though you are paying 9%. On a $500,000 loan over 30 years, that is the difference between $2,998 per month (actual) and $4,023 per month (assessment). The lender needs to be satisfied you can afford the higher figure.
The buffer is a consumer protection mechanism. It ensures borrowers can withstand rate increases without defaulting. When rates were at historic lows (2–3%), the buffer prevented people borrowing amounts they could never afford if rates returned to normal levels. In that context, it worked exactly as intended.
With rates already elevated, the 3% buffer means borrowers are being assessed at rates that are historically extreme. Being assessed at 9% when rates are unlikely to reach that level means many borrowers are being excluded from loans they could comfortably afford.
For first home buyers especially, the buffer is often the binding constraint — not income, not deposit, not property price. They can afford the actual repayments but cannot pass the assessment at the buffered rate.
The buffer is non-negotiable — all regulated lenders must apply it. But the impact varies by lender because each lender has different expense assumptions, income treatment, and serviceability calculators. The difference between the most and least generous lender can be $80,000–$120,000 in borrowing capacity for the same borrower.
Lendology tests your borrowing capacity across 60+ lenders to find the ones where the buffer impacts you least. Book a free chat and we will show you your maximum across the full panel.
APRA requires lenders to assess your ability to repay at a rate 3% above the actual loan rate. If your loan rate is 6%, the lender must confirm you can afford repayments at 9%. This reduces the maximum amount you can borrow compared to what your actual repayments would be.
Significantly. On a typical household income, the 3% buffer reduces borrowing capacity by approximately $100,000–$150,000 compared to assessment at the actual rate. The exact impact depends on your income, expenses and the lender.
There has been ongoing debate about whether the 3% buffer is too restrictive in the current environment. Any change would need to balance consumer protection against housing affordability. A reduction to 2.5% or even 2% would increase borrowing capacity meaningfully — but APRA has not signalled an imminent change.