If you've been surprised by how little a lender will let you borrow, the serviceability buffer is probably why. It's a safety margin set by the banking regulator, and it has a big effect on borrowing power when rates are high.
What it is
The Australian Prudential Regulation Authority (APRA) expects banks to assess whether you could still afford your loan if interest rates rose by at least 3 percentage points above the rate you'll actually pay.
So if your loan rate is 6.49%, the lender checks whether you could afford repayments at about 9.49%.
APRA raised the buffer from 2.5% to 3% in October 2021, when rates were very low and borrowing was growing quickly.
How it changes the numbers
On a $650,000 loan over 30 years:
| Rate | Monthly repayment |
|---|---|
| Actual rate, 6.49% | about $4,104 |
| Assessment rate, 9.49% | about $5,461 |
Your income must comfortably cover the $5,461 figure, after living expenses and other debts.
Why it exists
The buffer is meant to make sure borrowers can cope if:
- Interest rates rise
- Their income drops
- Their expenses increase
In 2026, with the cash rate up by 1.00% across four rises, many borrowers who were approved with a buffer are now paying more but still managing. That's the buffer doing its job.
The downside: mortgage prisoners
The buffer also makes it harder to refinance. Even if you'd be moving to a lower rate, a new lender tests you at the new rate plus 3%. Borrowers whose incomes haven't kept up can get stuck with their current lender. See mortgage prisoners.
APRA has said lenders can make exceptions to the buffer in some cases, for example for borrowers refinancing to a lower repayment with a good history. Some lenders now apply more flexible approaches to like-for-like refinances.
Do all lenders use 3%?
Banks regulated by APRA use at least 3%. Some use a minimum "floor" rate as well. Non-bank lenders aren't directly regulated by APRA in the same way and may use different buffers, though most apply similar standards under responsible lending rules.
How to work with the buffer
- Reduce debts and credit card limits to free up assessed income
- Choose the right lender. Expense and income treatment varies, even with the same buffer.
- Consider a longer term. It lowers the assessed repayment.
- Talk to a broker about refinance-specific policies.
Will the buffer change?
APRA reviews its settings regularly. In 2025 it signalled it would rely on its new debt-to-income limit as an additional tool, which began in February 2026, while keeping the buffer at 3%.
Frequently asked questions
Does the buffer mean I'll pay a higher rate?
No. It's only used for assessment. You pay the actual rate.
Is the buffer applied to my existing loan?
Not unless you apply for new or increased credit.
Does the buffer apply to fixed rate loans?
Yes. Lenders assess fixed loans using a buffered rate too, usually based on the rate you'd revert to.
Want to know how the buffer affects your borrowing? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654. We'll find the lender whose assessment gives you the most room.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
